B.  H,  PIERCE,, 
OLD  BOOK  SHOP, 

2 130  Oxford  St., 
r       el  y,      -      Calif. 


, 


PREFACE. 


For  the  average  man,  government  and  taxation  are  merely  abstract 
names,  and  of  little  interest  except  in  their  personal  application  to  him 
through  what  he  desires  or  fears  from  them.  These,  however,  are  times 
of  unrest  and  apprehension, — states  of  mind  veneered,  it  is  true,  in  the 
United  States  by  the  present  activity  in  business,  yet  but  thinly  veneered 
and  at  that  only  for  a  portion  of  the  people ; — and  as  a  consequence  of 
such  unrest  and  apprehension,  eyes  and  minds  are  now  turned  to  govern- 
ment, and  to  a  solvent  government's  strongest  arm,  taxation,  with  a  ner- 
vousness and  fervor  but  little  abated  from  the  high-pitch  climax  reached 
in  the  last  and  worst  of  our  great  panics.  There  are  derisive  voices 
which  cite  this  looking  to  government  as  lamentable  evidence  of  "long 
slide  toward  both  paternalism  and  maternalism"  by  a  nation  "once  inde- 
pendent as  well  as  free."  But  the  rustic  who,  in  ancient  fable,  sat  down  by 
river's  side  waiting  to  cross  until  all  the  water  should  run  by,  was  not 
more  foolish  than  he  who  in  these  days  expects  by  jeering  to  dry  up,  or 
turn  into  other  channels,  currents  flowing  from  deep-seated  feeling  in  the 
people.  An  almost  inappreciable  side  or  line  movement  of  a  great  gun, 
once  it  is  approximately  aimed  at  object  within  range,  determines  whether 
the  shell  it  bears  shall  explode  in  the  right  place  or  hurtle  harmlessly  by. 
Only  he  or  they  in  close  touch  with  the  machinery  can  give  to  the  huge 
cannon  its  correct  side  or  line  movement:  so  also  only  he  and  they  who 
bring  to  the  people's  cause  the  right  knowledge  and  the  right  sympathetic 
touch  may  fairly  hope  to  impress  on  popular  movements  directions  slight 
in  themselves,  yet  decisive  of  whether  the  goal  shall  be  squarely  reached 
or  just  missed;  decisive,  too,  of  whether  the -goal  shall  be  quickly  and 
economically  reached,  or  only  after  tedious  delay  and  tremendous  ex- 
penditure— sometimes  not  of  treasure  alone,  but  of  treasure  and  blood. 

There  is  an  inner  correspondence  between  government,  any  govern- 
ment as  we  understand  the  word,  and  its  system  of  taxation.  Or  to  put  it 
in  another  way,  taxation  is  the  book-keeper  of  government,  and  its  ledger 
truly  mirrors  the  wisdom  or  folly,  the  mingled  folly  and  wisdom,  of  gov- 
ernment. Economists  and  others  have  multitudinously  and  variously  de- 
fined taxes;  judges  have  based  important  conclusions  on  nice  distinctions 
as  to  what  is  and  what  is  not  a  "tax."  These  definitions  and  distinctions 
curiously  reflect,  in  so  far  as  they  attempt  precision,  the  ultimate  politi- 
cal tenets  of  their  makers.  I  set  forth  and  analyze  some  of  these  defir"' 


IV  PREFACE. 

tions  in  the  introductory  chapter  of  this  book.  Occasionally  a  definition 
racily  reflects  the  maker's  pet  aversion.  Thus  Dr.  Johnson  in  his  dic- 
tionary defines  the  "excise,"  which  with  us  goes  by  the  name  of  internal- 
revenue  tax,  as  a  "hateful  tax  levied  upon  commodities,  and  adjudged  not 
by  common  judges  of  property,  but  by  wretches  hired  by  those  to  whom 
excise  is  paid."  Readers  of  Rousseau  will  remember  the  striking  pass- 
age in  his  Confessions  (Part  I,  Book  IV),  wherein  he  tells  of  losing  his 
way,  and  asking  for  dinner  at  a  French  peasant's  cottage.  This  was  in 
1732,  and  in  that  year  of  grace  and  of  the  Old  Regime,  the  peasant  offered 
his  unbidden  guest  skim  milk  and  coarse  barley  bread,  saying  it  was  all 
he  had.  It  would  seem  from  an  expression  used  by  Rousseau  that 
straw,  ground,  chopped  or  otherwise,  was  mingled  with  the  barley  meal 
in  making  such  bread.  At  any  rate  he  fell  to  with  the  appetite  of  a  tired 
and  hungry  foot-traveler  (for  so  he  was),  and  ate  of  the  barley  bread, 
"straw  and  all."  The  peasant  judged  from  this  that  the  stranger  was  not 
shamming  hunger,  nor  visiting  his  hut  for  any  sinister  purpose.  So,  open- 
ing a  little  trap-door  beside  the  kitchen,  he  made  a  dive,  and  brought 
forth  a  pure  wheaten  loaf,  an  appetizing  ham  and  a  bottle  of  wine.  To 
this  spread  he  contrived  soon  to  join  a  "tolerably  thick  omelette."  And 
young  Rousseau  made  a  dinner  "such  as  only  a  pedestrian  ever  knew." 
When  Rousseau  offered  pay,  the  peasant  refused  his  money  in  great 
perturbation.  Just  out  of  Switzerland  where  things  were  different,  Rous- 
seau could  not  imagine  the  ground  of  his  host's  fear.  At  last  the  peas- 
ant, shuddering,  uttered  the  terrible  words  "clerks,  cellar-rats,"  meaning 
the  tax-farmer's  minions  who  went  nosing  about  to  collect  an  "aid"  on 
each  bottle  of  wine  and  a  faille  (literally  chop  or  cut)  on  each  loaf  of 
bread.  Aides  and  tattle  were  two  of  the  twenty-odd  taxes  that  used  to 
be  collected  in  France  under  the  Old  Regime.  The  peasant  explaining 
why  he  hid  his  bread  and  wine,  said  he  would  be  a  lost  man,  if  anybody 
suspected  "he  was  not  dying  of  hunger."  "I  had  not  the  least  idea  of  all 
this,"  adds  Rousseau;  "and  what  he  said  made  an  impression  that  will 
never  be  effaced.  It  was  the  germ  of  that  inextinguishable  hatred  which 
afterwards  grew  in  my  heart  for  the  vexations  which  beset  the  unhappy 
people,  and  for  the  oppressers  who  inflict  them."  A  still  more  curious 
instance  of  taxation,  as  affecting  life  and  morals,  even  literature  and  re- 
ligion, is  given  by  St.  Augustine  in  his  commentary  on  the  Sermon  on 
the  Mount.  A  Roman  prefect  had  taxed  a  certain  man,  believing  him  to 
be  a  tax  dodger,  to  pay  a  poundweight  of  gold  by  a  set  day,  or  suffer 
death  for  default.  "Swearing-off,"  as  they  call  it  in  New  York,  had  not 
yet  been  invented,  or  at  least  was  not  then  and  there  (Antioch,  about  A. 
D.  350)  in  vogue.  "The  dread  day  began  to  impend"  (Schaff's  transla- 
tion), and  the  unhappy  man  languishing  in  prison,  was  unable  "to  rid 
himself  of  that  debt."  His  only  tangible  asset  was  a  fair  and  loving  wife. 
A  certain  rich  man,  smitten  with  her  exceeding  beauty,  offered  a  pound 
of  gold  for  one  night's  conversation  with  her.  "Then  she,  knowing  that 
she  herself  had  not  power  over  her  body,  but  her  husband,"  went  to  the 


PREFACE.  V 

prison,  told  him  the  offer,  and  her  willingness  to  accept,  if  he,  "to 
whom  all  that  chastity  was  due,  should  wish  it  to  be  done."  It  does  not 
appear  from  Augustine's  account  that  there  was  any  struggle  in  the  hus- 
band's mind  between  natural  jealousy  and  equally  natural  love  of  life; 
for  "he  thanked  her,  and  commanded  that  it  should  be  done," — Augustine 
adding,  doubtless  from  his  own  sophistication, — "in  no  wise  judging  that 
it  was  an  adulterous  embrace,  because  it  was  no  lust,  but  great  love  for 
her  husband,  that  demanded  it,  at  his  own  bidding  and  will."  While  the 
woman  slept,  or  was  otherwise  unmindful  at  the  rich  man's  villa  of  the 
gold  he  had  given  her,  he  devising  a  novel  way  of  evading  his  tax,  substi- 
tuted base  earth  for  the  gold.  The  woman,  when  finally  aware  of  the 
fraud,  made  great  outcry,  went  to  the  prefect,  told  him  what  she  had  done 
and  why,  and  how  the  rich  man  had  cheated  her  out  of  her  husband's 
ransom.  Acyndinus  (such  was  the  prefect's  name)  did  rare  justice:  he 
fined  himself  a  pound  of  gold  for  the  public  purse,  and  compelled  the  rich 
skulker  to  make  over  to  the  woman  "that  piece  of  land"  whence  the  sub- 
stituted earth  had  been  taken.  I  believe  I  am  the  first  Shakespeare  com- 
mentator to  point  out  that  this  story  (the  original  and  analogue  of  the 
stories  underlying  Measure  for  Measure1)  was  doubtless  in  the  .poet's 
mind  when  that  play  was  writing.* 

It  is  enough  in  a  practical  book,  like  this,  to  merely  indicate  by  a  few 
examples,  as  above,  the  more  remote  bearings  and  wider  reaches  of  taxa- 
tion. In  the  body  of  the  work,  there  is  little  departure  from  the  main 
current  of  taxation — from  the  modern  instances  which  alone  have  con- 
trolling influence  with  those  for  whom  I  write.  The  Anglo-Saxon  brain 
has  a  most  praiseworthy  respect  for  fact;  it  cares  little  for  principle  di- 
vorced from  fact.  I  have  accordingly  taken  and  considered  in  detail  all 
the  important  questions  of  taxation  which  were  before  the  Minnesota 
legislature  last  winter,  substantially  in  the  order  in  which  they  were  acted 
upon,  or  failed  of  action.  These  questions  arose  in  the  main  upon  an 
elaborate  report  and  a  proposed  tax  code  prepared  by  a  tax  commission  of 
three  members  appointed  pursuant  to  legislation  had  fn  the  session  of  1901. 
They  were,  in  the  main,  argued  before  committees  of  one  or  the  other 
legislative  branch,  at  public  hearings  often  largely  attended.  I  pass,  then, 
in  review  the  tax  commission's  work,  the  arguments  before  committees, 
and  what  was  done,  undone,  or  left  undone,  by  the  legislature.  Every 
question  so  passed  in  review  has  been,  is,  or  will  be,  of  importance  in 
each  of  the  states  of  the  Union;  the  commentary  which  I  interweave,  in 
passing,  is  as  pertinent  to  the  general  principles  of  taxation,  as  if  it  wjsre 
nicely  framed  and  fitted  to  questions  of  my  own  choosing  and  given  in  my 
own  order — almost  as  pertinent  as  if  it  were  framed  with  particular  refer- 
ence to  questions  arising  in  any  other  state.  In  this  way  the  facts  and 
the  philosophy  go.  together ;  and  a  copious  index  enables  the  reader  to  find 


*THE    HERTIG    SHAKESPEARE     (in    preparation)  ;     Critical     Study    of 
Measure  for  Measure 


VI  PREFACE. 

again  whatever  may  specially  interest  him.  What  may  be  called  the  orig- 
inal chapters — and  they  are  very  important — come  in  an  order  largely  de- 
termined, and  with  matter  somewhat  affected,  by  the  foregoing  plan. 

No  doubt  this  is  an  uncommon  way  to  make  a  book  on  taxation.  Cer- 
tainly it  is  not  the  way  to  follow,  if  the  writer  aims  at  the  maximum  of 
intellectual  pleasure  for  himself,  and  the  minimum  of  routine  labor.  For 
an -orderly  mind,  what  the  Germans  call  a  "closed  system"  is  very  enticing. 
Except  as  led  by  motives  quite  apart  from  personal  pleasure,  I  should 
have  preferred,  in  lieu  of  this  work,  to  prepare  a  short  but  rigidly  syste- 
matic treatise  on  taxation  followed  by  a  draft  of  the  revenue  sections  of 
a  model  constitution  for  an  American  state,  and  that  in  turn  by  a  de- 
tailed tax  code  under  and  pursuant  to  such  constitution.  But  there  are 
the  people  as  one  finds  them,  with  wants  and  needs  as  they  apprehend 
them,  bound  more  or  less  by  constitution,  code,  and  custom  as  one  finds 
th$m :  I  should  be  a  fool  to  begin  a  campaign  of  education — and  I  am 
beginning  one — with  anything  that  would  even  indirectly  suggest  in  form 
or  substance  that  while,  as  scientists  say,  "nature  makes  no  leap,"  the 
people  are  to  make  long  and  sudden  leap  in  a  direction  hardly  even 
thought  about  heretofore.  It  is  one  thing  to  use  constructive  thought 
for  mental  pleasure ;  it  is  a  very  different  thing  to  be  the  medium  for 
crystallizing  into  the  very  body  and  shape  of  manifest  destiny  those  ten- 
dencies which  float  about  to  the  wonder,  or  perplexity,  or  anger  of  those 
who  hail,  or  puzzle  over,  or  hate  them  in  a  trinity  of  troubled  under- 
standings. 

This  is  not  a  history;  but  certain  facts,  without  which  no  good  history 
can  be  written,  are  here  grouped  and  preserved.  They  are  all  the  better 
for  mirroring,  as  far  as  they  go,  certain  typical  features  of  American  life 
and  legislation ;  at  the  same  time,  giving  the  structural  facts  of  taxation, 
they  reflect  the  atmosphere  and  the  channel  through  which  tax-laws  must 
come  or  fail  to  come.  Local  in  form,  they  are  sufficiently  universal  in 
substance  to  mislead  no  one  who  begins  with  them  to  study  the  problems 
of  American  taxation,  or  to  supplement  with  them  studies  made  at  and 
from  other  sources. 

The  chapter  on  the  growth  and  financing  of  the  Great  Northern  Rail- 
way Company,  profoundly  interesting  in  itself,  affords  abundant  matter 
for  whoever  would  moralize  on  the  proper  relation  of  wealth  to  taxation ; 
and  in  another  chapter  my  somewhat  lengthy  comparison  of  glittering 
new  brigands  with  brigands  who  in  splendor  or  tarnish  live  only  in 
history's  "pictured  page,"  signals  the  kind  and  quality  of  those  who  will 
most  certainly  not  fail  in  effort  to  shift  the  ta.x  back  on  us,  however 
successful  we  may  be  in  nominally  imposing  it  on  them.  Judicious  se- 
lection from  a  great  wealth  of  material,  and  from  the  considerations 
which  spontaneously  arise  in  presenting  fact  and  judgment — is  the  chief 
difficulty  for  whoever,  having  something  to  write  about  taxation,  would 
make  a  book  of  moderate  compass.  The  chapter  on  Henry  George's  sin- 
gle tax,  while  perhaps  as  difficult  as  any  in  such  respect,  was  certainly 


PREFACE.  VII 

not  more  so  than  some  of  the  other  chapters,  and  I  found  it  much  freer 
than  they  from  inherent  general  difficulty  of  arrangement  and  detail. 
Regretting  that  so  much  idealism,  very  valuable  if  elsewhere  and  other- 
wise engaged,  should  be  now,  as  it  were,  wasted  on  the  single-tax  the- 
ory, I  still  trust  that  the  single-taxers  will  not  find  me  lacking  in  appre- 
ciation of,  and  courtesy  toward,  what  they  have  done,  and  what  (much 
more)  they  vainly  hope  to  do.  Some  good  comes  of  earnest  attempt,  if 
not  the  good  expected.  In  like  manner,  my  occasional  reference  to  some 
particular  bankruptcy  of  political  economy  must  be  construed  as  con- 
sistent with  holding  that  it  has  still  some  estate  to  administer;  but  per- 
haps it  would  be  found  more  appropriate  to  call  it,  in  certain  of  its  forms, 
the  permanent  apologist  and  receiver  of  a  bankrupt,  but  still-going, 
civil  society.  For  the  rest,  many  economists  themselves  now  find  Ricar- 
do's  table  set  with  humble  pie  instead  of  the  proud  ambrosia  which  De 
Quincey  and  others  gleefully  proclaimed  bespread  it;  and  of  the  later 
economists,  the  Nation,  of  New  York,  regrets  that  many  are  singing 
"songs  of  freedom  and  filling  the  bellies  of  the  poor  with  the  East  wind." 
For  whoever  will  search  out,  and  cling  tenaciously  to,  a  wide  range  of 
emotional  and  objective  facts,  never  fail  to  find  room  for  further  facts, 
never  fall  into  the  absolutism  of  adopting  a  last-ditch  social  formula 
and  of  committing  to  it  his  own  common  sense  and  the  world's  experience, 
insist,  before  giving  any  practical  value  to  any  mathematical  formula 
of  any  economist,  that  it  be  usable  after  the  analogy  of  Kutter's  formula 
for  determining  the  "mean  velocity  of  water  flowing  in  open  channels 
of  uniform  cross  section  and  slope,"* — such  a  person  may  read  any  econ- 
omist with  profit,  and  generally  with  considerable  militant  pleasure,  sure, 
in  any  event,  if  he  reads  many  economists,  to  find  means  of  casting  out 
the  Devil  with  Beelzebub.  They  profess  in  these  days  a  hearty  allegi- 
ance to  facts ;  and  their  treatises  present  in  convenient  form  a  great 
many  valuable  ones.  The  path  from  anywhere  leads  over  the  world. 
When  economists  lay  out  a  path  on  paper,  call  that  path  a  law  of  eco- 
nomics, and  declare  it  to  have  a  physically  corresponding  path  in  the 
real  world, — in  the  course  and  sequence  of  certain  highly  important  phe- 
nomena of  civil  society,  then,  in  general,  neither  the  professors  nor  their 
disciples  can  keep  within  the  strict  limits  of  the  economic  path;  but  with 
more  or  less  stealth,  with  more  or  less  openness,  they  follow  it  over 
the  world,  pronouncing  critical,  or  it  may  be  constructive,  judgment 
on  a  multitude  of  things  formally  excluded  from  their  province.  It  is 
as  Auguste  Comte  has  said,  "a  miserable  metaphysic"  that  pretends  to 
elucidate  a  group  of  social  phenomena  by  isolating  the  same  in  thought 
from  the  influence  of  other  social  phenomena ;  and  professors  and  dis- 
ciples are  rather  to  be  commended  for  their  inconsistency  in  not  keep- 


*"A11  such  formulae,  liable  to  error  arising  from  the  difficulty  of 
ascertaining  the  exact  condition  of  the  stream  as  regards  roughness  of 
bed,  surface  slope,  etc." — TRAUTWINE. 


VIII  PREFACE. 

ing  within  the  formal  limits  of  political  economy,  but  poaching  every- 
where in  other  departments  of  sociology.  Professors  like  Cairnes  have 
shown  a  curious  ignorance  of  human  nature  and  human  need  in  enter- 
taining and  defending  the  notion  that  "the  laws  of  economics  are  as 
distinct  as  possible  from  rules  of  action,  that  political  economy  is  'neutral !' 
They  forget  that  the  laws  of  political  economy  are  converted  into  rules 
by  sheer  force  of  necessity,  and  that  the  maintenance  of  this  neutrality 
is  practically  impossible" — a  truth  amply  proved  in  their  own  ranks;  for, 
"as  a  matter  of  fact,  while  affecting  the  reserved  and  serious  air  of  stu- 
dents, political  economists  have  all  the  time  been  found  brawling  in  the 
market-place." — ARNOLD  TOYNBEE,  in  "Ricardo  and  the  Old  Political  Econ- 
omy." Certainly  the  economist  writer  is  not  hard  to  find  who,  with  a 
few  formulas  and  no  tincture  of  jurisprudence,  essays  to  cut  wide  swath 
through  every  department  of  government. 

The  field  of  taxation  proper  is  hardly  to  be  approached  without  right 
of  way  through  the  general  domain  of  public  revenue,  nor  to  be  trodden 
discreetly  without  the  guiding  hand  of  jurisprudence.  How  effort  herein 
has  kept  pace  with  such  requirement;  how  in  a  book  of  moderate  com- 
pass, pre-eminently  illustrative  to  its  author  of  the  fact  that  it  is  harder 
to  write  a  small  book  than  a  large  one ;  in  a  book  planned  to  treat 
critically  the  immediate  problem  of  its  subject,  yet  to  fail  not  in  many 
a  constructive  suggestion;  in  a  book  planned  to  give  that  subject  a  pre- 
liminary clearing  of  common  errors  and  a  large  setting  of  appropriate  and 
often  neglected  fact ;  in  a  book  whose  immediate  problems,  of  vast 
weight  as  they  are,  ever  revolve  in  the  author's  mind  into  nearly  related 
and  collateral  ones  of  equal  and  of  greater  weight;  in  a  book  meant  to 
show  a  keen  consciousness  of  fetter  and  wing,  yet  to  carry  each  with 
apparent  ease, — how  in  such  book  I  have  had  such  audacity  of  attempt, 
and  the  greater  audacity  of  acknowledgment,  are  matters  of  personal 
quality,  itself  good  for "  a  hundred  thousand  in  an  age  where  nominal 
freedom  is  too  often  the  mask  of  intellectual  cowardice. 

Free  choice,  without  the  compelling  limitation  of  space,  would  have 
impelled  me  to  avoid  the  prolix  classifications  and  sub-classifications  of 
which  the  Germans  are  so  fond,  and  which  are  unspeakably  wearisome 
to  most  American  readers,  and  of  no  calculable  importance  to  influence 
American  events.  Governments  get  revenue  by  gift,  by  contract,  and  by 
compulsion.  This  is  the  classification  adopted  by  Prof.  Seligman,  who 
prefers  to  call  "contractual  income"  that  which  the  Germans  term  "pri- 
vate, economic  income," — meaning  thereby  the  income  derived  by  gov- 
ernment from  its  own  "lands  or  other  revenue-yielding  property,"  and 
from  its  "mercantile,  financial  or  industrial  pursuits,"  when  government 
chooses  to  engage  in  them.  To  the  sources  mentioned  by  Seligman  may 
be  added  another,  that  is  to  say,  escheat,  whereby  government  takes 
decedents'  estates  when  heirship  fails  through  lack  of  kindred  and  lack 
of  testamentary  disposition.  Most  contractual  income  of  government 
will  be  found,  if  we  carry  analysis  back  a  step,  to  rest  on  compulsion: 


PREFACE.  IX 

compulsion  is  the  seed;  contract  the  fruit.  Thus  the  public  domain  of 
the  United  States,  when  acquired  by  cession  for  an  agreed  price,  or  ces- 
sion as  a  result  of  war,  began  in  compulsion,  since  when  paid  for,  the 
price  grew  out  of  compulsory  taxation,  and  when  taken,  as  from  Mexico, 
the  compulsion  is  still  more  apparent.  Even  where  the  United  States  has 
conceded  that  the  American  Indians  had  a  good  title  to  their  lands,  it 
has  insisted  that  it  alone  had  the  right  to  acquire  such  title  from  the 
Indians,  and  by  virtue  of  its  sovereign  claim  has  ousted  individuals  of 
title  acquired  by  them  from  the  Indian  owners  in  good  faith. 

The  foregoing,  or  primary,  classification  of  public  revenues  is  not  that 
on  which  writers  have  spent  doughty  effort  and  full  measure  of  con- 
troversial zeal.  They  save  their  forces  for  the  tug  of  war  that  comes  in 
the  wrangle  over  classification  of  the  revenues  which  government  forcibly 
takes  from  the  natural  and  artificial  persons  within  its  jurisdiction,  in 
this  disputatious  domain  of  tax  classification,  "all  possible  combinations," 
as  Seligman  says,  "have  been  made,  especially  by  recent  German  writ- 
ers."— Essays  in  Taxation,  267.  Fees,  for  instance,  to  which  Seligman 
devotes  a  few  lucid  pages,  and  which  are  the  name  given  to  those  sums 
charged  or  assessed  by  government  for  a  special  service  or  a  special  priv- 
ilege— occupy  a  hundred  and  sixty-six  very  sizable  and  very  crowded 
pages  in  Adolph  Wagner's  Fww,Hzwusenschaft,  and  are  treated  by  some 
other  German  writers  with  a  copiousness  of  detail  which  I  shall  neither 
particularize  nor  imitate.  But  I  will  not  with  quite  the  Spartan  brevity 
of  Seligman  pass  over  government's  right  to  take  the  property  of  individ- 
uals by  exercising  the  power  of  eminent  domain  and  the  penal  power. 

"The  power  of  eminent  domain  confers  on  the  government  the  right 
of  taking  at  its  discretion,  and  to  an  indefinite  extent,  private  property. 
With  the  constitutional  and  moral  limitations  upon  this  power  we  have 
not  here  to  deal,  chiefly  because  the  power  is  for  the  most  part  not  a 
source  of  net  revenue."  So  saying,  (pp.  267-8),  Seligman  dismisses  emi- 
nent domain  with  the  further  remark  that  taking  under  this  power  is 
limited  to  taking  for  public  use  and  with  "just  compensation,"  without 
contemplation  of  net  income  from  the  property  to  be  so  acquired,  but 
with  some  prospect  of  such  income  in  view  of  property  conceivably 
worth  more  than  damages  awarded  for  the  taking.  The  New  Jurispru- 
dence will  be  much  exercised  over,  and  will  much  exercise  this  power. 
Its  first  need  will  be  to  fix  a  constitutional  limit  to  the  ''just  compensa- 
tion" to  be  awarded  individual  owners.  Everybody  knows  that  the 
greedy  Me,  lying  more  or  less  dormant  in  the  individual,  becomes  clamor- 
ously wide  awake  the  moment  it  is  known  that  a  piece  of  his  property  is 
wanted  under  the  power  of  eminent  domain.  The  dead  set  made  by 
Parisian  owners  and  occupants  against  the  public  purse  when  the  regime 
of  Napoleon  111.  wanted  to  widen  and  otherwise  change  the  streets  of 
Paris — affords  a  typical  case.  Where  the  law  provides  that  property  shall 
be  appraised  for  taxation  at  its  "full  and  true  value,"  the  hog  in  the 
Philistine  owner  would  be  almost  estopped  from  squealing  against  a  con- 


X  PREFACE. 

stitutional  provision  which  should  fix  as  the  maximum  of  damages  be- 
tween him  and  the  state  a  sum,  say  twice  the  average  assessed  value  of 
the  property  during  the  five  years  preceding  1903.-  To  fix  such  a  rule 
with  proper  local  exceptions  and  equitable  qualifications  is  a  difficult 
but  by  no  means  an  unsolvable  problem.  I  mention  it  here  merely  as 
showing  the  wide  vistas  which  the  bare  mention  of  the  subject  opens 
up  for  an  expert. 

So  also  the  penal  power,  or  "the  power  to  adjudge  fines  and  penalties," 
is  treated  by  Seligman  with  like  brevity, — a  reference  to  "the  vague  pro- 
vision" in  the  Constitution  against  excessive  fines,  and  the  remark,  fol- 
lowing his  definition  of  the  power,  that  it  "belongs  rather  to  penology 
and  administration  than  to  the  science  of  finance;  for  that  the  private 
property  is  here  taken,  not  in  accordance  with  the  needs  of  the  state  or 
with  any  principles  of  equality  or  uniformity  or  benefits  or  compensa- 
tion, but  solely  as  a  punishment  inflicted  on  the  individual."  But  it  must 
be  remembered  that  forfeitures  of  charters  and  franchises  is  a  branch 
of  the  penal  power ;  that  large  corporations  habitually  and  even  wantonly 
violate  the  express  or  implied  terms  on  which  they  enjoy  their  charters 
and  franchises;  that  if,  for  concrete  instance,  the  proceedings  now  pend- 
ing in  various  courts  against  the  Northern  Securities  Company  should 
prove  to  be  in  result,  as  is  sometimes  predicted,  little  more  than  horse- 
play, or  even  if  they  should  be  technically  effective, — the  states  whose 
laws  the  offending  corporations  have  violated,  may  still  take  a  short, 
an  effective  and  even  a  retrospective  cut  to  forfeit  the  respective  fran- 
chises ;  and  fix  at  the  same  time  the  measure  of  compensation  to  them 
for  what  will  be  technically  "scrap,"  the  only  property,  besides  realty 
and  rolling  stock,  that  they  will  have  remaining.  Whatever  may  be  the 
inner  disposition  of  the  federal  judiciary,  I  conceive,  that  it  will  find  itself 
estopped  from  interfering  with  or  impairing  the  right  procedure  of  the 
states  in  this  behalf. 

The  taxing  power  proper,  often  confounded  in  part  with  the  so-called 
"police  power,"  of  which  more  in  due  order,  is  in  modern  states  even 
more  important  than  either  the  power  of  eminent  domain  or  the  penal 
power,  as  furnishing  the  indispensable  basis  for  their  exercise.  The 
three  together  become  irresistible  in  the  hands  of  the  right  statesman- 
ship as  means  for  carrying  into  effect  its  plan  of  individual  rights.  Sub- 
ject to  the  foregoing  qualification  and  reminders,  Seligman,  summing  up 
(p.  302),  is  to  be  commended  for  helpful  brevity:  *  *  *  "We  find 
that  under  actual  conditions  all  public  revenues  are  either  gratuitous, 
contractual  or  compulsory  contributions;  that  the  compulsory  contribu- 
tions are  levied  in  virtue  of  the  power  of  eminent  domain,  of  the  penal 
power  (either  as  a  separate  power  or  as  the  fiscally  important  part  of 
the  police  power),  or  of  the  taxing  power;  and,  finally,  that  the  taxing 
power  manifests  itself  in  the  three  forms  of  fees,  special  assessments  and 
taxes."' — ibid.  Special  assessments,  "a  comparatively  modern  and  a 


PREFACE.  XI 

specifically    American    development,"    have    written    a    very    large   and    in 
places  a  very  confused  chapter  in  American  law. 

All  taxation  is  intimately  related  to  law,  but  this  is  not  a  law  book,  any 
more  than  it  is  a  history.  In  American  jurisprudence  there  is  an  immense 
number  of  adjudicated  cases  upon  tax  questions.  Some  of  these  declare 
principles,  correct  or  otherwise,  but  citable  and  applicable  to  taxation 
in  general,  or  to  taxation  in  its  relation  to  our  dual  government  of 
nation  and  state.  By  far  the  greater  number,  however,  involve  points 
that  go  only  to  minor  infringement  or  alleged  infringement  of  individual 
right,  and  go  neither  to  the  validity  or  invalidity  of  a  whole  tax  levy. 
I  have  freely  cited  and  discussed  some  of  the  more  important  cases — 
those  that  buoy,  or  it  may  be,  block  the  way  to  ultimate  Civil  Code.  An 
c .therwise  good  taxer  is  as  naught  unless  he  is  himself,  or  is  piloted  by, 
a  competent  jurist.  I  have  therefore  endeavored  to  give  in  luminous 
outline  the  federal  constitutional  landmarks  which  should  be  present  to 
the  mind  of  every  legislator  or  other  person  who  studies  state  taxation; 
and  I  have  been  careful  to  point  out  the  wide  vistas  in  possible  taxation, 
which  the  courts  have  not,  as  yet,  attempted  to  close  against  the  people. 
It  will  be  seen  that  I  have  not  abused  my  familiarity  with  jurisprudence, 
to  overload  the  book  with  technical  law.  The  meaning  of  such  novelties 
as  the  New  Jurisprudence  and  the  Civil  Nation  is  sufficiently  apparent 
from  the  context  of  the  passages  where  they  occur.  For  the  rest,  these 
matters  will  be  more  fully  elucidated  in  my  forthcoming  work  on  the 
Constitution  of  the  United  States,  to  which  this  book  may  serve,  in  some 
measure,  as  an  introduction. 

My  work  in  the  making  of  this  book  has  been  considerably  increased 
from  the  fact  that  I  have  had  to  be  not  only  the  final,  but  to  some  extent 
the  intermediate,  proof-reader.  The  linotype  machine  has  its  advantages ; 
but  they  conduce  neither  to  the  proof-reader's  satisfaction,  nor  to  the  high- 
est finish  of  the  printed  page.  The  resetting  of  a  line  to  change  a  point 
or  a  capital,  or  a  "wrong  font"  letter,  not  infrequently  gives  rise  to  a  worse 
flaw  in  the  reset  line.  Accordingly,  to  save  labor,  I  have  occasionally 
passed  lines  not  quite  conforming  to  my  standard  in  the  respects  men- 
tioned, but  reproducing  "copy"  with  substantial  accuracy  and  without  am- 
biguity. Such  slight  seeming  of  caprice  as  is  herein  apparent,  as  well  as 
in  the  omission  of  accent  marks  from  foreign  words,  may  be  considered 
the  caprice  of  convenience,  but  not  of  carelessness.  C.  M.  H. 


CHAPTER  I. 


Taxation  in  general  purpose  and  result  with  sundry  particular  instances, 
and  a  glance  at  the  political  atmosphere  whence  other  instances  are 
to  come. 


I  compress  taxation  into  the  alliterative  formula,  taxa- 
tion for  robbery,  taxation  for  revenue,  taxation  for  reform. 
This  formula  measures  exhaustively  all  kinds  of  taxation 
from  the  standpoint  of  their  results,  and  nearly  so  from  the 
standpoint  of  conscious  purpose  in  the  power  that  levies  taxes. 
A  tribute  imposed  by  strength  upon  weakness  in  return  for  the 
privilege  conceded  that  the  tribe  or  other  social  aggregate  pay- 
ing such  tribute,  shall  not  otherwise  be  mulcted  in  person  or  prop- 
erty by  the  tribe  or  people  receiving  it,  differs  in  no  essential  re- 
spect from  the  more  or  less  accidental  tribute  levied  by  robber  on 
passing  wayfarer;  in  both  cases,  immunity  as  to  person  and  other 
property  for  the  time  being  is  the  only  return  which  the  receivers 
of  the  tribute  make  for  it.  In  both  cases,  too,  the  result  is  the 
finish  of  a  robbery ;  only  in  the  case  of  the  stronger  tribe  or  people 
exacting  tribute  from  weaker  tribe  or  people,  the  former  would 
hardly  have  a  conscious  purpose  to  rob;  they  would  at  least  de- 
scribe their  purpose  as  different  from  that  in  the  mind  of  any  one 
who  should  set  out  to  plunder  in  his  individual  capacity  another 
individual  entitled  to  the  rights  and  immunities  of  the  plunderer's 
own  tribe  or  people;  and  they  would  not  call  their  tribal  or  ag- 
gregate purpose  by  any  name  of  reproach.  So  also  in  levying 
tributes  which  are  more  properly  dignified  with  the  name  of  taxes, 
than  the  simpler  tributes  just  mentioned, — those  who  levy  have 
seldom  indeed  the  distinct  consciousness  of  purpose  to  rob,  and 
seldomer  still  the  cynical  frankness  that  would  be  equal  to  ad- 
mitting such  purpose,  though  their  particular  brand  of  taxation 
might  in  practical  effect  be  well  likened  to  downright  robberv. 
Taxation,  in  anything  like  the  sense  now  attached  to  the  word, 
begins  only  where  robbery  pure  and  simple  ends,  and  where  trib- 
ute makes  a  first  step  toward  taxation, — that  is,  where  there  is  at 
least  some  promise  of  return  for  the  tribute  levied,  other  than  of 


14  5 ,  HERTIG    ON    TAXATION. 

mere  immunity  from  the  attack  of  him  who  exacts.  This  prom- 
ise may  be  in  the  nature  of  an  agreement  to  protect  generally ;  or 
the  tribute  and  the  return  therefor  may  be  in  a  form  (if  we  go 
back  to  rude  and  remote  beginning  of  civil  polity),  that  we  catch 
so  imperfectly  as  to  get  no  basis  for  clear  understanding  or  prof- 
itable comparison.  There  are  differences  in  individual  man,  and 
in  his  social-unit  groups,  too  wide,  in  measure  of  time,  stage  and 
race,  to  be  of  much  comparative  value  to  any  one  unless  to  him 
who  values  for  its  own  sake  a  conjecture  plausibly  made,  a  story 
well  told,  or  a  contrast  strikingly  set  forth.* 

My  formula,  then,  is  not  meant  to  lead  anyone  into  a  specious 
absolutism,  or  meant  to  foreclose  anyone  of  the  historical  and 
evolutionary  domain  that  may  seem  to  him  to  invite  scrutiny  of 
its  older  highways  and  byways  leading  to  and  from  taxation.! 

For  us  at  least,  "all  beginning  is  in  the  middle" ;  what  we  shall 
tax  and  how  we  shall  tax,  depends  more  on  a  sheer  one  way  or  the 
other  with  exact  reference  to  the  current  in  which  we  move,  than 
on  any  attempted  navigation  with  raft  or  life  boat  purposely  fash- 


*Wagner,  without  having  in  mind  any  thought  resembling  the  prop- 
osition put  forth  in  the  text,  enumerates  elaborately  three  distinct  kinds 
of  difficulties  that  stand  in  the  way  of  comparing  the  tax  systems  of  dif- 
ferent places  and  countries,  even  for  historical  times  in  ample  reach, 
even  for  the  present  time  with  text  and  official  directory  as  to  the  dif- 
ferent laws  on  one's  desk, — difficulties  that  face  him,  German  professor, 
as  he  acknowledges,  even  in  confining  himself  to  his  native  tongue  and 
solving  the  contradictions  and  variations  between  its  bureaucratic  jargon 
(amtliche1  Te^minologie)  and  its  use  in  the  moujhs  of  the  people,  in 
comparing  tax  measures  and  tax  results  for  different  German  places  and 
periods.  "Thus  one  and  the  same  name  of  a  particular  tax  does  not 
mean  in  the  same  language,  German,  for  instance,  always  the  same  thing 
in  the  different  countries  where  such  language  is  in  use ;  it  may  even 
change  its  meaning  in  the  same  country,  subject  to  the  same  tax  legis- 
lation,— for  example,  the  expression  "income  tax"  in  Prussia,  Bavaria, 
Austria.  And  he  gives  literally  a  bead-roll  of  other  German  names  for 
different  taxes  subject  to  the  contingency  of  meaning  one  thing  here  and 
something  less  or  something  more  there.  He  urges  special  caution  "in 
the  judging,  in  praise  and  blame,  in  the  recommendation  of  foreign  ex- 
emplars, and  particularly  in  setting  up  a  sweeping  judgment  on  historical 
developments"  (namentlich  aber  auch  im  Gesammturtheil  iiber  geschicht- 
liche  Entwicklungen.) — Finanzivissenschaft,  Erganzungsheft,  3-7. 

*Prof.  Seligman  constructs  for  the  development  of  taxation  a  "hi«- 
torical  process"  scale  consisting  of  seven  steps  or  stages,  which  he  illustrates 
and  tactily  assumes  to  prove  sufficiently,  by  instancing  seven  corresponding 
etymological  stages,  or  groups  of  tax  names  expressing  each  the  notion 
which  mediaeval  and  modern  Europe  affixed  and  affixes  to  each  tax  stage 
in  due  succession.  The  professorial  inclination  to  absolutism  seems  to 
have  hindered  Seligman  from  divorcing  the  particular  development  which 
he  finds  in  the  narrow  area  of  Europe  and  in  the  short  stretch  of  mediaeval 
and  modern  time,  from  the  possible  and  actual  developments  of  taxation 
in  other  countries  and  other  times.  Perhaps  he  believes  his  seven  stages 


HERTI.G    ON    TAXATION.  15 

ioned  of  historical  or  evolutionary  material.  Such  raft  or  al- 
leged life  boat  will  not  have  even  the  efficacy  of  driftwood ;  that, 
at  least,  is  sometimes  seriously  in  the  way,  while  craft  launched 
from  professorial  ways  amount,  in  general,  to  no  more  than  cock- 
boats just  sufficient  to  carry  the  professors  and  their  salaries — to 
toss  in  the  wake  of  the  ship  of  state,  or,  it  may  be,  to  be  run  down 
by  her  with  scarcely  a  tremor  along  her  keel.  Nothing  is  more 
important  than  fact ;  nothing  more  inevitable  than  theory ;  and 
nothing  more  misleading  than  formula  implying  fact-register 
closed  and  theory  perfect  in  application.  The  path  of  Political 


to  be  necessary  and  inevitable  wherever  taxation  has  been  or  shall  be 
developed!  The  mind  willingly  erects  its  own  order,  sometimes  its  dis- 
order, into  a  rigid  limitation  of  nature. 

Here  are  Seligman's  seven  stages:  "The  original  idea  was  that  of 
gift.  The  individual  made  a  present  to  the  government.  [Mediaeval  Latin 
donum,  English  benevolence.}  *  *  *  The  second  stage  was  reached 
when  the  government  humbly  implored  or  prayed  the  people  for  support. 
[Latin  precarium,  German  Bede.}  *  *  With  the  third  stage  we  come 
to  the  idea  of  assistance  to  the  state.  [Government,  if  not  getting  gift, 
was  at  least  getting  a  favor,  evidenced  by  Latin  adjutorium,  English  aid, 
French  aide;  also  by  English  subsidy  and  contribution,  German  steur, 
connoting  help,  and  by  Scandinavian  hjelp.]  *  *  *  The  fourth  stage 
of  development  brings  out  the  idea  of  sacrifice  by  the  individual  in  the 
interest  of  the  state.-  He  now  surrenders  something-  for  the  public  good. 
[Old  French  gabelle,  German  abgabe,  Italian  dazio.}  *  *  *  With  the 
fifth  stage  the  feeling  of  obligation  develops  in  the  taxpayer.  [Evidenced 
by  duty,  used  in  a  much  wider  sense  formerly,  and  in  Eneland,  even  now 
in  a  somewhat  wider  sense  than  that  of  a  custom-house  toll.]  It  is  not 
until  the  sixth  stage  is  reached  that  we  meet  the  idea  of  compulsion  on 
the  part  of  the  state.  [English  impost  or  imposition,  French  impot. 
Italian  imposta,  German  auflage  and  aufschlag.  *  *  *  *  With  the 
seventh  and  final  stage  we  reach  the  idea  of  a  rate  or  assessment,  fixed 
or  estimated  by  the  government  without  any  reference  to  the  volition  of 
the  taxpayer.  *  *  *  *  [Our  tax,  French  taxe,  Italian  tassa,  English 
rate.]  It  is  worthy  of  note  that  in  the  middle  ages  '"tax"  [the  word 
itself  or  its  etymological  analogue]  meant  a  direct  tax,  for  which  a  reg- 
ular assessment  list  or  schedule  was  made." 

So  far  Seligman's  seven  stages.  To  the  extent  that  they  are  of 
substance  and  not  merely  of  form,  it  will  be  found,  I  think,  that  wher- 
ever the  idea  of  a  contribution  which  we  moderns  call  "tax"  was  not 
associated  with  compulsory  payment,  either  the  central  government  had 
but  feeble  authority,  as  in  France  before  the  kings  got  firm  administrative 
grip  on  the  independent  and  quasi-independent  feudal  barons ;  or  the 
jurisdiction  of  the  taxing  power  was  otherwise  on  a  disputed  basis.  It 
is  likely  enough  that  whoever  gave  or  paid  relished  the  payment  or 
gift  little  better  for  the  name  it  had.  I  recall  in  this  connection,  and 
translate,  a  vigorous  passage  from  J.  B.  Say :  "Whatever  name  be  given 
it,  whether,  contribution,  tax,  obligation,  subsidy,  or  even  free  gift,  it 
is  a  charge  imposed  on  private  persons,  or  associations  of  such,  by  the 
sovereign,  people  or  prince,  to  provide  for  the  outlay  which  he  thinks 
proper  to  make  at  their  expense. — Traite-d' -Economic  Politique  (5th  ed., 
3  vols.,  Paris,  1826),  in,  144. 


16  HERTIG    ON    TAXATION. 

Economy  is  as  thickly  littered  with  cock-sure  theories  gone  bank- 
rupt, as  if  Sir  James  Steuart,  an  economist  before  Adam  Smith, 
had  not  written  (Inquiry  into  the  Principles  of  Political  Economy, 
London,  1768,  p.  369),  "Theory  is  not  sufficient  to  lay  open  politi- 
cal consequences,  even  to  the  greatest  genius ;  all  our  information 
as  to  those  matters  arises  from  experience."  On  the  other  hand, 
there  are  works  of  approved  German  pattern  distinguished  for 
facts  heaped  up  with  painful  conscientiousness  and  disfigured  with 
awkward  helplessness  in  using  them — where  indeed  lucid  state- 
ment of  important  facts  is  the  thing  most  frequently  lacking. 
The  man  embarrassed  by  the  wealth  of  his  material  is  prone  to 
make  poor  use  of  what  he  has.  Attraction,  in  some  cases  at  least, 
is  certainly  "proportional  to  destiny" :  and  poor  judgment,  trained 
in  pedant's  way,  instinctively  seeks  shelter  behind  bulky  volumes. 

Taxation  for  robbery,  taxation  'for  revenue,  taxation  for  re- 
form, in  the  order  mentioned,  set  forth  in  rough  approximation 
the  successive  stages  which  we  may  assign  to  taxation  from  the 
standpoint  of  its  historical  evolution.  Here  again  I  caution 
against  falling  into,  or  attributing  to  me,  a  specious  absolutism. 
These  kinds  are  never  quite  distinct  in  point  of  time,  never  quite 
distinct  in  co-existence,  perhaps  never  quite  distinct  in  purpose. 
The  subtle  man  will  not,  and  the  simpler  man  should  not,  fail  to 
remember  that  robbery  for  plunder,  robbery  for  revenue  to  laud- 
able uses,  and  robbery  to  effect  a  real  or  supposed  reform  may  all 
be  resultantly,  if  not  purposely,  merged  in  one  and  the  same  tax 
levy. 

If  we  PT>  back  a  few  hundred  years  and  call  taxes  those  trib- 
utes levied  by  the  princeling's  of  Romaena,  who,  as  Machiavelli 
savs.  "plundered  rather  than  governed  their  subjects  to  correct 
ends." — there  undoubtedly  was  taxation  for  robbery  in  a  type 
nearly  pure ;  and,  just  like  robbery,  it  recked  little  if  it  killed  the 
goose  that  laid  golden  eggs.  For  modern  instance,  certain  por- 
tions of  taxes  or  tribute  levied  in  some  cities,  and  occasionally 
throughout  states,  in  amounts  fixed  bv  corrupt  ring  rule, — ap- 
proach perhaps  as  closelv  to  the  pure  type  of  taxation  for  robbery 
PS  any  instance  belonging  to  our  own  times.  Thus  taxation  in 
the  state  of  New  York,  dictated  and  imposed  by  canal  and  other 
corrupt  rings  for  years  prior  to  1875,  had  made,  as'  Samuel  J- 
Tilden  said,  the  burdens  even  of  rural  taxpayers  "nearlv  unen- 
durable." It  was  while  governor  of  New  York,  that  Tilden  in 
1875  made  a  speech  at  Syracuse,  and  in  direct  reference  to  mem- 
bers of  the  canal  ring  that  had  plundered  within  the  forms  of  law, 
told  of  the  applications  for  pardon  that  had  been  made  to  him 
by  the  friends  and  relatives  of  ordinary  criminals  whom  the  law 
had  put  in  prison,  and  how  in  consequence  of  these  applications 


HERTIG    ON    TAXATION.  17 

for  pardons,  he  had  looked  into  the  particular  circumstances  of 
those  so  imprisoned.  "When,"  said  he,  "I  have  compared  their 
offense,  in  their  nature,  temptations  and  circumstances,  with  the 
crimes  of  great  public  delinquents  who  claim  to  stand  among 
your  best  society  and  are  confessedly  prominent  among  their  fel- 
low citizens, — crimes  repeated  and  continued  year  after  year, — I 
am  appalled  at  the  inequality  of  human  justice." — Tilden's  Works 
(N.  Y.  1885)  II,  pp.  220-1. 

Though  an  extended  enumeration  of  instances  where  taxation 
was  a  cover  for  robbery  is  not  within  the  scope  of  this  work,  1 
will  mention  a  class  of  cases  peculiar  to  other  times  and  a  differ- 
ent civilization,  where  perhaps  the  consciousness  of  wrong 
intended,  and  wrong  inflicted,  may  have  been  hardly 
present  at  all — cases  furnished  by  India,  not  so  ancient  as 
some  of  the  things  we  know  about  India,  but  as  far  back  as  we 
can  go  in  that  country  for  facts  relating  to  taxation,  in  a  sense 
at  all  approximate  to  the  sense  which  we  attach  to  the  word. 

"The  Indian  monarchs,"  says  Sir  Henry  Sumner  Maine,  "of 
whose  practices  we  have  any  real  knowledge  took  so  much  of  the 
produce  in  the  shape  of  land  revenue  as  to  leave  to  the  cultivating 
groups  little  more  than  the  means  of  bare  subsistence." — Village 
Communities  (New  York,  1876)  p.  179.  In  considering  the  sub- 
ject of  taxation  in  what  are,  to  us  at  least,  its  historical  begin- 
nings, due  allowance  must  be  made  for  the  different  shades  and 
claims  of  title  to  levy  the  tax,  impose  the  tribute,  or  get  in  any 
name,  whatever  was  exacted  which  from  this  distance  looks  like 
a  tax.  The  proposition  which  Maine  cautiously  puts  forth  may 
here  be  cited :  "In  the  beginning  of  the  history  of  ownership 
there  was  no  such,  broad  distinction  as  we  now  commonly  draw 
between  political  and  proprietary  power,  between  the  power 
which  gives  the  right  to  tax  and  the  power  which  confers  the 
right  to  exact  rent." — Id.r  228-9.  Perhaps,  too,  a  caution  will  be 
in  place  here,  to  take  "robbery"  in  its  most  popular  sense.  The 
good  judge  of  the  story  who  set  aside  a  bad  verdict  with  the  re- 
mark that,  in  his  court,  it  took  thirteen  men  to  "rob"  a  man  of 
his  farm  gives  a  sufficient  clue  to  that  sense.  Moreover,  the  less 
poetic  judges  whose  wit  and  wisdom  are  chronicled  in  dry  law  re- 
ports, not  infrequently  describe  some  particular  phase  of  taxation 
as  robbery,  or  plunder.  Thus  Jeremiah  S.  Black,  as  Chief  Justice 
of  Pennsylvania,  said,  in  1853,  When  taxation  "is  prostituted  to 
objects  in  no  way  connected  with  the  public  interests  or  welfare, 
it  ceases  to  be  taxation,  and  becomes  plunder." — Sharpless  v. 
Mayor  of  Phila.,  21  Pa.  St.  169.  Compare  Bagehot's  piquant 
characterization  of  "the  primitive  notion  of  taxation,"  which, 
however,  to  be  intelligently  applicable  to  particular  time  and 


18  HERTIG    ON    TAXATION. 

place,  must  be  taken  as  a  notion  relatively  recent  in  historical 
time:  "The  primitive  notion  of  taxation  is  that  when  a  govern- 
ment sees  much  money,  it  should  take  some  of  it,  and  that  if  it 
sees  more  money  it  should  take  more  of  it." — Works,  Morgan's 
ed.  (Hartford,  1891),  V.  307. 

A  passage  often  quoted  from  Lcs  Cafacteres  de  la  Bruyerc, 
first  published  in  1687,  and  to  which  the  incident  from  Rousseau, 
given  in  my  preface,  affords  life-like  detail,  gives  a  striking  pic- 
ture of  the  "Man  with  the  Hoe,"  as  he  was  under  the  Old  Regime 
in  France,  or,  for  that  matter,  is  anywhere  under  robbing  taxation 
and  a  government  where  he  has  no  voice.  A  despotic  is  always 
a  plundering  government;  and  despotism  has  many  forms.  La 
Bruyere  says  in  the  famous  passage: 

"You  shall  see  certain  wild-looking  animals,  male  and  female, 
scattered  over  the  country — swarthy,  livid  and  sunburnt,  bound 
to  the  earth  which  they  dig  and  turn  over  with  invincible  tenac- 
ity. They  have  a  sort  of  articulate  voice  ;  and  when  they  straight- 
en up  on  their  feet,  they  show  a  human  face.  They  are  in  fact 
men.  They  withdraw  at  night  into  dens  where  they  live  on  black 
bread,  water  and  roots ;  they  spare  other  men  the  trouble  of  plow- 
ing, sowing  and  reaping,  and  deserve  therefore  not  to  be  scanted 
in  the  bread  from  their  fields." — But  the  extortioners  in  ancient 
France  knew  what  they  were  doing,  and  in  self-justification  were 
wont  to  say :  "The  peasant  must  be  poor,  else  he  won't  work !" 
II  faut  que  le  paysan  soit  pauvre,  pour  qu  il  ne  soit  pas  paresseux. 
J.  B.  SAY,  Cours  d?  Economie  Politique. 

An  up-to-date  pendant  of  La  Bruyere's  picture  is  furnished  by 
the  Italian  peasant,  little  less  wretched  now  than  was  his  French 
brother  three  hundred  years  ago.  Professor  Lombroso  and 
others  testify  that  he  has  special  diseases  resulting  from  insuffi- 
cient food.  The  Indian  monarchs,  of  whom  Maine  speaks, 
robbed  in  the  traditionary  Oriental  way  which  had  crystallized 
into  fixed  habit  and  unquestioned  right ;  modern  and  united  Italy, 
in  the  span  of  one  generation,  professing  allegiance  to  liberty, 
progress,  constitutionality  and  other  catchwords  of  these  times, 
has  certainly  used  modern  financial  ways  and  means  to  pile  up  a 
debt  which  leaves  to  her  fiscal  system  no  alternative  but  robbery 
or  repudiation.  And  present  robbery  means  ultimate  repudiation. 
From  the  over-abundant  testimony  upon  the  robbing  taxation  in 
Italy,  I  select  at  random  the  following:  "Taxes  have  reached 
such  an  excessive  limit,  and  are  exacted  in  such  a  vexatious  way, 
that  they  almost  assume  the  character  of  theft.  Justice  is  a 
myth.  Magistrates  can  be  bought  and  sold  with  the  greatest 
facility  and  for  a  low  price.  Public  security  is  null  and  the  most 
treacherous  crimes  can  be  committed  in  the  very  center  of  the 


HERTIG    ON    TAXATION.  19 

largest  cities." — Open  Court,  Vol.  XIII,  485.  There  is  an  inti- 
mate connection  between  Italian  taxation  and  Italian  anarchists, 
as  there  is  between  Russian  despotism  and  Russian  revolutionists. 
Reading  and  international  communication  being  now  universal, 
no  nation  or  country  escapes  wholly  from  the  problems  and 
plague  spots  which  centre  in  other  nations  and  countries — matter 
treated  at  some  length  in  my  forthcoming  work  on  Anarchism 
and  Counter- Anarchism.  Governmental  incompetence,  it  cannot 
be  too  often  repeated,  is  always  reflected  in  the  resulting  taxa- 
tion. 

Taxation  for  revenue,  and  nothing  more,  has  not  been  rare  in 
American  commonwealths,  and  particularly  in  their  minor  sub- 
divisions. Where  wealth,  or  it  would  perhaps  be  more  appropri- 
ate to  say,  where  poverty  is  so  evenly  distributed  that  neither 
tax-dodger  nor  clamor  of  "privilege"  is  much  in  evidence,  taxes 
are  in  fact  so  nearly  "equal  and  uniform"  that  the  well-meaning 
framers  of  constitutions  which  decree  such  equality  and  uniform- 
ity need  not  go  further  in  search  of  their  ideal  realized.  The 
taxes  imposed  by  the  first  congress  of  the  United  States,  in  1789', 
under  the  then  newly  ratified  Constitution,  were,  in  practical 
effect,  and  some  have  thought  in  intent,  purely  taxes  for  revenue. 
Revenue  was  the  first  and  most  crying  of  needs,  and  such  a  thing 
as  a  surplus  to  squander,  or  even  to  spend  legitimately,  was 
farthest  from  the  mind  of  a  congress  which  fixed  the  salary  of 
its  own  members  at  the  modest  figure  of  six  dollars  per  day 
during  session,  and  allowance  of  one  day  for  each  20  miles  of 
travel.  But  congress  imposed  no  taxes  except  by  way  of  duties 
on  imports,  which,  as  calculated  by  Worthington  C.  Ford,  ^were 
on  an  average  "equivalent  to  an  ad  valorem  rate  of  8^/2  per  cent." 
It  is  curious  that  this  first  tariff  of  the  United  States,  which 
was  not  in  fact  a  protective  tariff,  purported  to  be  one, — its  pre- 
amble running :  "Whereas,  it  is  necessary  for  the  support  of  the 
government,  for  the  discharge  of  the  debts  of  the  United  States, 
and  the  encouragement  and  protection  of  manufactures,  that 
duties  be  laid,"  etc.  "In  the  whole  history  of  tariff  legislation 
in  this  country  it  is  the  only  law  which  was  thus  openly  passed 
for  protection  to  American  industry." — Ford,  in  Cyclopedia  of  Po- 
litical Science,  title  "Tariffs  of  the  United  States."  But  protec- 
tion had  its  advocates  in  the  first  congress.  Thomas  Hartley,  a 
member  from  Pennsylvania,  contrived  to  say  something  that 
sounds  as  little  outworn  as  if  uttered  yesterday:  "I  think  it 
both  politic  and  just  that  the  fostering  hand  of  the  General  Gov- 
ernment should  extend  to  all  those  manufactures  which  will  tend 
to  national  utility." — Bentoris  Abridgement  of  the  Debates  of 
Congress,  I,  25.  Hartley's  colleague,  George  Clymer,  "was  satis- 


20  HERTIG     ON     TAXATION. 

fied  that  a  political  necessity  existed,"  both  for  "encouraging 
manufacturers  and  obtaining  revenue"  by  duties. — Id.  27.  And 
as,  moreover,  there  was  no  lack  of  sentiment  to  the  effect  that  the 
volume  of  those  duties  would  be  of  tremendous  magnitude, — 
Bland,  of  Virginia,  thinking  there  was  not  money  enough  in  the 
country  to  pay  the  proposed  duties  (Id.  61),  and  finding  echo 
for  his  opinion  in  the  well-known  Elbriclge  Gerry,  of  Massachu- 
setts (Id.  64), — it  would  seem  that  the  first  congress,  in  enacting 
a  tariff  "for  revenue  only,"  did  not  know  it  any  more  than  the 
excellent  M.  Jourdain,  of  iVloliere's  humor,  knew  that  he  spoke 
prose. 

Local  taxation,  as  practiced  in  the  minor  subdivisions  of  the 
American  states,  is  generally  free  from  all  intent  to  rob,  and  so 
furnishes  many  instances  ot  taxation  for  revenue  in  its  purest 
form,  as  well  as  in  its  purest  intent.  It  must  not  be  forgotten, 
however,  that  there  are  individualists,  who,  believing  it  to  be  the 
whole  right,  duty  and  function  of  government  to  furnish  judge 
and  policeman,  see  thinly  disguised  robbery  in  all  school  taxes, 
park  taxes  and  the  like,  just  as  the  same  or  other  individualists 
see  thinly  disguised  tyranny  in  compulsory  vaccination,  in  quar- 
antine laws,  and  in  many  other  measures  enforced  by  govern- 
ment. The  small  duty  on  sugar  lately  levied  by  the  British  gov- 
ernment, as  one  of  the  revenue  necessities  growing  out  of  the 
Boer  war,  is  in  purpose  and  effect  a  tax  for  revenue  only ;  but, 
like  all  taxes  on  consumption,  from  its  very  nature  it  is  levied  on 
consumers  without  regard  to  their  relative  ability  to  pay,  and  so 
is  shut  out  from  the  equitable  aim  of  levying  taxes  in  proportion 
to  each  tax-payer's  purse. 

A  tax  measure  may  wear  the  appearance  of  taxation  for  reve- 
nue only,,  and  yet  easily  cover  other  motives,  or  be  incomplete  for 
revenue  purposes  unless  supplemented  by  other  legislation.  The 
British  duties  on  tobacco  are  fully  illustrative  of  all  these  phases. 
They  do  yield  considerable  revenue, — 9,277,000  pounds  sterling 
in  the  year  1884-5,  I2»838,578  pounds  for  1900-1901.  But  it  is 
not  generally  known  that  Great  Britain  prohibits  under  penalty 
the  growing  of  tobacco  in  the  United  Kingdom ;  and  it  seems  not 
to  be  generally  observed  that  while  Great  Britain  levies  duties 
equivalent  to  about  93  cents  per  pound  on  snuff,  $1.21  per  pound 
on  cigars,  $1.10  on  cavendish  and  $1.00  on  other  manufactured 
tobacco,  she*  makes  the  duties  on  raw  tobacco  about  33  cents 
per  pound  less  on  an  average,  and  thus  gives  to  the  British  man- 
ufacturing tobacconist  an  enormous  protection — much  as  differ- 
ential duties  between  raw  and  refined  sugar  "protect"  sugar 
refiners  in  the  United  States.  This  difference  is  prohibitory  of 
the  importation  of  manufactured  tobacco.  "Our  custom  returns 


HERTIG    ON     TAXATION.  21 

for  1882  show  an  export  from  the  United  States  to  England  of 
290,000  cigars,  worth  $10,251,  no  snuff,  and  all  other  manufac- 
tures of  tobacco  only  $604,141."  VAN  BUREN  DKNSLOW,  Prin- 
ciples of  Economic  Philosophy  (New  York,  1888),  p.  481. 

"About  one-half  of  England's  importation  of  tobacco,  to-wit, 
30,000,000  pounds,  comes  from  the  United  States." — Id.  480. 

Historically  speaking,  taxation  for  reform  comes  late  in  what- 
ever civilization  it  manifests  itself, — after  allegiance  to  govern- 
ment and  to  the  permanence  of  taxation  of  some  sort  have  become 
unquestioned  necessities  in  the- average  consciousness  of  civilized 
man ; — perhaps  not  until  after  some  of  his  poets  have  sung  like 
Goethe : 

Law's  rights  and  wrongs  outlast  the  dead  and  gone — 
Eternal  sickness  handed  down  and  on.* 

Instances  of  taxation  for  reform  pure  and  simple,  that  is  to 
say,  divorced  from  expectation  of  revenue,  are  not  very  numerous  ; 
but  taxes  for  more  money  and  collaterally  for  morality,  or  other 
•aim  of  reform,  are  not  uncommon. 

In  1790,  before  the  United  States  had  any  excise  or  internal 
revenue  tax.  Alexander  Hamilton  then  secretary  of  the  treas- 
ury, ur^ed  "additions"  to  duties  on  imported  wines  nnd  spirits 
and  the  laying  of  a  tax  on  spirits  "distilled  within  the  United 
States."  "The  consumption  of  ardent  spirits,"  he  siid  in  his  re- 
port to  the  House  of  Representatives,  *  *  *  "no  doubt  very 
much  on  account  of  their  cheapness,  is  carried  to  an  extreme 
which  is  truly  to  be  regretted,  as  well  in  regard  to  the  health  and 
morals  as  to  the  economy  of  the  community.  Should  the  increase 
of  duties  tend  to  a  decrease  of  the  consumption  of  those  articles, 
the  effect  .would  be  in  every  respect  desirable.  *  *  *  It  is 
not,  however,  probable  that  this  decrease  would  be  in  a  decree 
vliHi  would  frustrate  the  expected  benefit  to  the  revenue  from 
raisin0"  the  duties." — Works,  Lodge's  ed.  (New  York,  1886), 
TI,  p.  91. 

Most  governments  are  too  hard  pressed  for  morev  to  tax 
of  set  purpose  anythin^  out  of  existence,  unless  with  the  expec- 
tation of  substitutinT  for  it  somethine  else  which  they  prefer. 
If  a.  lio-hter  tax  will  let  it  live  and  yield  revenue,  they  will  not 
ordinarily  carry  the  weight  of  the  tax  to  the  crushing  and  de- 


*Es    erben    sich   Gesetz   und    Rechte, 
Wie  eine  ew'ge  Krankheit  fort. — Faust. 

This  couplet  has,  of  course,  only  such  authority  as  belongs  to  Mephis- 
tonhclrs,  who  speaks  it.  Perhaps,  however,  some  will  think  it  strikingly 
annroprinte  that  the  devil  himself  should  attest  the  devilishness  of  the 
burden  which  has  been  entailed  by  dead  generations  on  succeeding  ones, 
by  laws  and  the  obligations  incurred  under  them. 


22  HERTIG    ON    TAXATION. 

stroying  point/  But  the  government  of  the  United  States  is 
unique  in  its  relations  to  the  government  of  the  several  states, 
and  unique  in  financial  resources.  The  government  at  Washing- 
ton can  illustrate  on  various  objects,  and  without  financial  in- 
convenience, the  saying  of  Chief  Justice  Marshall,  "The  power 
to  tax  involves  the  power  to  destroy."  It  has  used  this  radical 
power  of  taxation  in  more  than  one  instance,  and  to  reforming 
ends.  Any  state  in  the  American  union,  except  as  hindered  tem- 
porarily by  its  own  constitution  and  courts,  both  of  which  it 
can  change  at  pleasure,  can  tax  to  death  any  industry  whose  home 
is  in  such  state ;  but  it  cannot  tax  the  means  nor  the  goods  of 
commerce  between  the  states,  except  under  such  limitations  as 
render  it  impossible  for  the  state  to  keep  objectionable  goods  that 
are  made  in  other  states  out  of  its  markets.  The  federal  govern- 
ment is  absolutely  without  direct  power  to  prohibit  the  making 
and  sale  of  any  article  in  any  of  the  states,  unless  the  same  is 
contraband  of  war  and  for  use  in  violation  of  some  treaty,  or 
against  the  government  itself.  But  what  the  United  States  can- 
not do  directly  it  can  do  indirectly ;  it  has  the  right  to  select  ob- 
jects for  internal  revenue  taxes,  and  to  lay  such  tax  thereon  as 
congress  in  its  discretion  may  impose.  Thus  congress  reformed 
one  feature  of  banks  organized  and  operating  under  state  laws 
by  providing  (Act  of  March  3,  1865),  "That  every  national  bank- 
ing association,  state  bank  or  bankin^  association,  srmll  pay  a 
tax  of  ten  per  centum  on  the  amount  of  notes  of  any  state  bank 
or  state  banking  association,  paid  out  by  them  after  the  first  day 
of  July,  1866."  Any  bank,  therefore,  can  receive  state  bank  notes 
without  incurring  any  tax  or  penalty ;  they  can  be  used  as  money, 
also  without  tax  or  penalty,  between  private  individuals  or  non- 
banking  concerns ;  any  bank  or  other  owner  of  them  can  present 
them  for  redemption  to  the  bank  of  issue  and  demand  payment, 
still  without  tax  or  penalty ;  but  no  bank  may  pay  them  out  ns 
money  without  incurring-  said  tax.  It  of  course  yields  no  reve- 
nue, but  it  has  caused  state  bank  bills  to  disappear  from  circula- 
tion, and  has  wholly  prevented  their  further  issue, — furnishing 
thus  a  striking  instance  of  the  power  of  taxation  to  effect  reform, 
where  in  the  mind  of  the  taxin^  power  reform  and  destruction 
mean  the  same  thing.  But  it  is  important  to  note  here  that  the 
work  of  destructive  taxation  is  most  complete  and  thorough  when 
it  is  directed  against  an  artificial  commoclitv  of  a  particular  kind 
(state  bank  notes),  and  leaves  substantially  untouched  another 
artificial  commodity  (greenbacks  and  national  bank  notes),  which 
will  do  the  work  of  the  taxed-out  commodity  as  well  as  it  did 
or  better.  If  the  artificial  commodity  so  taxed  is  a  staple  article 
of  manufacture,  for  which  there  is  no  acceptable  substitute,  then 


HERTIG    ON    TAXATION.  .    23 

an  excessively  high  tax  will  neither  be  successful  from  the  stand- 
point of  revenue  nor  of  reform ;  the  manufacture  and  consump- 
tion will  go  on,  as  it  did  when  whisky  was  taxed  two  dollars  per 
gallon  in  the  period  1865-1868,  and  the  payment  of  the  tax  will 
be  largely  evaded,  as  was  the  tax  on  whisky  during  that  period. 
In  taxation  for  reform,  as  for  any  other  purpose,  the  foolish  tax, 
the  injudicious  tax,  the  tax  which  overreaches  its  object,  is  sure 
and  direct  breeder  of  fraud  and  perjury. 

The  oleomargarine  law,  just  passed  by  congress  and  going 
into  effect  July  I,  1902,  is  destined  perhaps  to  afford  striking  il- 
lustration of  the  doctrine  advanced  in  the  preceding  paragraph. 
This  law  imposes  a  tax  of  ten  cents  per  pound  on  oleomargarine 
colored  in  imitation  of  butter, — a  tax  which,  like  that  on  state 
bank  notes,  is  meant  to  be  practically  prohibitory.  The  hardy 
axmen  and  teamsters  in  Minnesota  logging  camps  ate  last  winter, 
in  lieu  of  butter,  and  ate  without  complaint,  oleomargarine  which 
cost  the  employer  about  fourteen  cents  per  pound,  while  butter 
itself,  of  satisfactory  quality,  could  not  have  been  supplied  at  less 
than  twenty-five  cents  per  pound.  A  quarter  of  a  century  and 
longer  ago  the  joke  of  "strong"  butter  was  as  staple  in  the  comic- 
paragraph  laboratory  as  is  yet  the  mother-in-law  joke  and  others 
of  like  currency.  Wide  extension  of  processes  for  makinsr  good 
butter,  and  the  successful  competition  of  oleomargarine  (practi- 
cally unobjectionable  as  regards  looks  and  flavor)  with  the  cheap- 
er and  ranker  grades  of  "butter, — have  practically  killed  the  butter 
joke  by  removing  its  every-day  basis  from  most  tables.  Inferior 
butter  goes  largely  to  the  renovator  to  be  made  over,  or  goes  into 
uses  where  its  individual  character  is  otherwise  disguised,  or 
where  at  least  it  has  no  echo  sufficient  to  reach  the  paragrapher's 
ears. 

Now  the  new  law  just  mentioned  plainly  and  in  set  terms 
discriminates  between  oleomargarine  and  butter  by  taxing  the 
former  ten  cents  per  pound,  as  aforesaid,  and  taxing  renovated 
butter  one-quarter  of  a  cent  per  pound.  It  is  known  that  in  con- 
templation of  the  law's  taking  effect,  "laree  firms  throughout  the 
countrv  have  been  purchasing  low  grades  of  butter"  (daily  press), 
with  the  result  of  a.dvancine  inferior  butter  or  "packing-  stock" 
to  a  price  relatively  higher  than  it  was  as  compared  with  good 
butter.  Stress  is  laid  on  the  fact  that  oleomargarine  plants  are 
ready,  with  little  or  no  change,  to  renovate  or  otherwise  handle 
inferior  butter  on  a  colossal  scale.  It  is  surmised  that  the  buyers 
of  low-grade  butter  will  work  it  over  in  their  oleomargarine 
plants,  mix  it  with  oleomargarine,  and  sell  the  compound  so 
produced  as  "imitation  butter,"  and  under  that  name.  If  such 
surmise  is  correct,  then  no  doubt  the  manufacturers  expect  that 


24  HERTIG    ON    TAXATION. 

the  color  of  the  butter  used  in  the  mixture  will  sufficiently  color 
the  resulting  compound  to  make  its  appearance  pleasing  to  con- 
sumers; and  no  doubt  also  they  will  claim  that  the  oleomargarine 
contained  in  the  compound  is  not  "colored  in  imitation  of  butter" 
within  the  meaning  and  intent  of  the  law,  and  so  not  subject  to 
the  tax  of  ten  cents  per  pound.  If,  as  is  claimed,  the  new  "imita- 
tion butter"  shall  be  so  plainly  stamped  or  labeled  that  the  pur- 
chaser will  know  exactly  what  it  is,  then  the  compound  will  not 
be  impeachable  as  a  fraud  on  the  buyer.  Should  these  contentions 
successfully  run  the  gauntlet  of  the  federal  courts,  oleomargarine 
as  heretofore  known  will  disappear  from  the  markets,  and  low- 
grade  butters  be  confined  to  the  market  made  for  them  by  special 
dealers  for  factory  use ;  while  the  general  public,  in  lieu  of  them 
both,  will  buy  "simply  a  mixture  of  renovated  butter  and  oleo"- 
perhaps  not  quite  so  desirable  a  food-product  as  the  staple  oleo- 
margarine theretofore  in  current  use.  Palm  oil,  too,  is  mentioned 
as  a  possible  ingredient  in  the  new  oleomargarine.  It  has  a  high 
color,  and  if  courts  will  kindly  hold  that  its  new  use  is  proper 
food  use,  and  not  merely  for  the  coloring  of  oleomargarine  in 
imitation  of  butter,  the  new  oleomargarine  will  not  be  subject 
to  the  new  revenue  law. 

Should  the  new  law  lead  to  such  result,  it  will  of  course  fail  in 
its  two- fold  intent  of  reform  by  prohibition,  and  in  such  failure 
prove  itself  a  revenue-yielder  of  considerable  importance,  if  the 
new  "imitation  butter"  shall  be  held  technically  subject  to  the 
tax  of  a  quarter  of  a  cent  the  pound.  The  tax  on  state  bank  notes 
was  entirely  successful,  as  measured  bv  its  intent,  because  in  clos- 
ing one  channel  it  consciously  left  another  straight  and  broad  one 
wide  open ;  the  two-dollar  tax  on  whisky  failed  because  in  over- 
hampering  legal  channel,  it  perforce  shunted  commercial  forces 
into  opening  and  following  the  channel  of  fraud ;  the  new  oleo- 
margarine tax  is  likely  to  fail,  if  measured  in  its  intent,  by  seek- 
ing to  close  an  established,  and,  as  some  think,  hiorhlv  beneficial 
commercial  demand,  without  favoring  or  opening  another  channel 
for  those  forces  to  flow  in  which  made  the  one  so  sought  to  be 
closed.  Vast  commercial  interests  controlling  proportionate  and 
aggressive  capital  are  thus  put  upon  their  ingenuity  to  open  a 
substitute  channel.  Naturally  they  will  prefer  that  such  substi- 
tute channel  be  technically  legal.  It  costs  a  pood  deal  of  money 
to  violate  with  success  a  formal  revenue  law  of  the  United  States ; 
but  that  cost  can  be  nicely  ascertained,  and  where,  taking  all  re- 
sults into  consideration,  fraud  on  the  revenue  laws  is  very  prof- 
itable, that  kind  of  fraud  will  be  practiced — propositions  abun- 
dantly proved  bv  experience  during:  the  period  of  two-dollar 
tax  on  whisky.  In  general,  then,  reform  taxation  to  be  successful 


HERTIG    ON     TAXATION.  25 

must  not  load  with  prohibitory  tolls  any  broad  channel  of  trade 
unless,  at  the  same  time,  it  opens  or  leaves  open  a  sufficiently 
capacious  other  channel  whose  use  shall  conduce  more  to  the  wel- 
fare of  the  people  than  the  one  sought  to  be  closed.  Moreover, 
reforms  effected  or  intended  by  taxation  are  never  accomplished 
but  in  the  face  of  an  opposition  proportionate  to  the  magnitude 
of  the  interests  adversely  affected ;  and  the  commercial  opposition 
is  often  reinforced  by  those  who  have  no  financial  interest.  Thus 
David  A.  Wells,  writing  more  than  a  dozen  years  ago,  and  while 
attempted  prohibitive  legislation  against  oleomargarine  had  been 
confined  to  the  state  legislatures,  said :  "The  attempt  to  crush 
out  of  use  by  legislation  one  of  the  most  brilliant  discoveries  of  the 
age,  namely,  the  manufacture  of  butter  from  the  fat  of  the  ox, 
equally  as  wholesome  as  that  made  from  the  fat  (cream)  of  the 
cow,  is  a  libel  on  civilization ;  and,  as  depriving  the  masses  of  a 
better  article  of  desirable  food  at  cheaper  rates,  than  very  many  of 
them  have  been  accustomed  to  have  or  can  now  procure,  would 
be  fiercely  resented  by  them,  if  once  properly  and  popularly  under- 
stood."— Recent  Economic  Changes,  449.* 

While,  then  reform  by  means  of  taxation  has  an  open  field  oF 
great  importance,  the  discreet  use  of  it  requires  the  nicest  and 
most  delicate  quality  of  practical  statesmanship. 

Equally  pertinent  to  remember  in  this  connection  is  the  fact 
that  it  is  only  in  the  guise  of  a  revenue  measure  that  congress  can 
lawfully  enact  a  pure-food  law.  It  is  not  claimed  by  any  school 
or  individual,  amon<r  interpreters  of  the  federal  Constitution,  thnt 
the -government  at  Washington  has  any  right  whatever  to  regulate 


*In  saying  above  that  "attempted  prohibitory  legislation  against  oleo- 
margarine had  been  confined  to  the  states,"  I  perhaps  overstated  the  case. 
State  laws  manifestly  intended  to  be  prohibitory  had  been  passed,  as  the 
New  Hampshire  statute  prohibiting  the  sale  of  oleomargarine  unless  col- 
ored pink ;  but  congress,  too,  had  acted,  and  imposed  a  tax  which  some 
claimed  would  prove  prohibitory, — that  is  to  say,  a  tax  of  two  cents  per 
pound,  and  a  license  tax  in  varying  amounts  on  manufacturer,  whole- 
saler and  retailer.  The  act  imposing  such  tax  was  passed  in  August, 
1886.  There  was  no  claim  and  no  reason  to  claim  that  the  United  States 
needed  to  cast  about  for  new  sources  of  revenue.  The  tax  was  mani- 
festly a  tax  on  food  ;  and  was  undeniably  passed  for  the  sole  reason  that 
dairy  and  farming  interests  called  for  something  of  the  kind.  Grover 
Cleveland,  then  president,  signed  the 'bill.  Having  put  himself  forward 
as  an  anti-protection  doctrinaire,  as  an  individualist  so  far  as  one  may 
be  in  American  nolitics,  he  had  in  acting  on  this  bill  a  good  opportunity 
to  show  his  consistency,  and  he  knew  it  sufficiently  well  to  think  it 
worth  while  to  deny  that  he  had.  Noticing  in  his  message  of  signa- 
ture that  it  had  been  urged  against  the  measure  that  under  guise  of 
revenue  legislation  its  real  purpose  was  "to  destroy,  by  the  use  of  the 
taxing  power,  one  industry  of  our  people  for  the  protection  and  benefit 
of  another," — he  made  a  pretense  of  consistency  by  professing  to  believe 


26  HERTIG    ON    TAXATION. 

directly  the  manufacture  or  sale  of  any  commercial  article  in  any 
one  of  the  several  states ;  and  that  the  constitutional  power  to  tax 
would  be  used  by  congress  to  do  indirectly  along  these  lines  what 
it  may  not  do  directly  seems  not  to  have  entered  the  imagination 
of  the  Fathers.  True,  the  right  to  regulate  commerce  between  the 
states  has  in  its  extension  and  exercise  become  of  immense  impor- 
tance ;  but  that  has  nothing  to  do  with  the  manufacture  of  an 
article,  nothing  to  do  with  its  quality,  and  nothing  to  do  with  its 
sale  except  to  guard  against  its  exclusion  from  markets  in  states 
where  it  is  not  manufactured.  Power  to  tax,  however,  practi- 
cally includes  all  other  powers  over  the  subjects  of  taxation ;  and 
wherever  the  payment  of  a  tax  can  be  made  a  condition  precedent 
to  the  sale  of  any  article,  then  the  taxing  power  may,  within  the 
limits  of  feasibility  and  of  its  own  territory,  drive  such  article 
from  the  markets. 

What  is  the  check  on  destructive  taxation,  imposed  for  reform 
or  otherwise  ?  In  the  United  States  there  is  the  check  of  positive, 
or  written  law  as  set  forth  in  the  federal  Constitution  and  in  the 
constitutions  of  most  of  the  states.  But  the  people,  or  that  por- 
tion of  the  people  which  governs,  can  abolish  or  change  the  fed- 
eral, or  any,  constitution.  Besides,  as  shown  later  in  this  book, 
the  present  limitations  on  the  taxing  power  of  the  federal  govern- 
ment imposed  by  the  federal  Constitution  are  not  limitations  of 
quantity.  On  final  analysis,  it  is  apparent  that  the  only  check 
on  the  power  of  nation  or  state  to  take  property  within  its  limits, 
in  the  name  of  taxation  or  otherwise,  to  any  amount,  is  the  na- 
tional or  state  conscience;  perhaps  we  should  say,  in  the  United 
States,  national  and  state  conscience.  And  the  collective  con- 
science of  the  effective  majority  in  nation  or  state  gives  the  meas- 
ure of  the  national  or  state  conscience.  The  distinction  made  by 
some  writers  between  effective  majority  and  numerical,  or  nomi- 
nal, majority  is  a  very  happy  one.  Effective  coincides  with  num 
erical  majority  only  when  what  is  enacted  by  legislatures,  done 


that  it  was  in  fact  meant  for  a  revenue  law,  and  put  himself  on  the 
plane  of  practical  politics  in  these  words:  "If  entitled  to  indulge  in 
such  a  suspicion  as  a  basis  of  official  action  in  this  case,  and  if  entirely 
satisfied  that  the  consequences  indicated  would  ensue,  I  should  doubt- 
less feel  constrained  to  interpose  executive  dissent."  The  tax  of  two 
cents  per  pound  so  imposed,  and  meant  to  protect  butter,  was  not,  in  fact, 
heavy  enough  to  effect  the  desired  end.  The  amount  of  oleomargarine 
manufactured  and  sold  in  the  United  States  has  continually  increased, — 
"from  34.; ^25,000  pounds  in  1888  to  48.364.000  in  1802,  and  60,632.000  in 
1804."  Oleomargarine  exported  and  sold  abroad  was  not  reached  bv  the 
two-cent  tax ;  and  the  export  trade  reached  figures  ereater  than  those  for 
the  home  markets, — 127,103.000  pounds  'being  exported  in  1894.  Those 
figures  I  take  from  Wells's  Theory  and  Practice  of  Taxation,  p.  257. 


HERTIG    ON    TAXATION.  27 

by  executives,  and  adjudged  in  courts,  happens  to  coincide  with 
the  wish  of  a  majority  of  the  people.  A  brilliant  case  of  such 
coincidence  was  furnished  by  congress  in  appropriating,  immedi- 
ately after  the  fateful  destruction  of  the  Maine,  $50,000,000  to  be 
expended  in  the  discretion  of  the  President.  Other  examples  of 
truly  representative  legislation,  state  and  federal,  are  not  indeed 
rare ;  but  they  wear  scars  got  in  partisan  resistance ;  their  working 
effect  has  often  been  modified  by  concessions  made  to  secure  their 
passage ;  and  in  general  they  have  lacked  the  seal  of  spontaneous 
and  universal  rush  to  desired  end  so  characteristic  of  the  dra- 
matic act  of  1898.  Yet  the  great  bulk  of  legislation,  however  im- 
portant and  far-reaching  its  effect,  expresses  prosaic  matters  in  a 
form  and  to  an  end  that  do  not  arouse  emotions,  nor  shock  morals  ; 
it  is  like  the  day's  events  plaintively  described  by  the  newsboy 
as  being  "lots  of  news  but  nothin'  to  holler;"  it  may  carry  un- 
noticed a  sly  rider  intended  for  strangling  its  professed  intent. 
Bar  rider,  the  same  is  even  more  widely  true  of  the  bulk  of 
decisions  made  and  judgments  rendered  by  the  courts.  In  most 
matters,  then,  of  legislation  and  litigation,  the  relation  of  numeri- 
cal majority  to  effective  majority  is  one  of  passive  acquiescence. 
To  arouse  this  acquiescence  into  an  occasional  cheer,  and  especial- 
ly to  prevent  it  from  lapsing  into  utter  indifference — or  rousing 
itself  to  rebellion — is  the  routine  game  of  practical  politics  and  of 
the  effective  majority  as  such  game  is  ordinarily  played. 

Great  issues  are  embarrassing  issues  to  bankrupt  statesman- 
ship ;  and  if  it  can  give  to  the  very  fringe  and  outskirt  of  an  issue 
the  seeming  of  central  importance,  substitute,  as  it  were,  the  fringe 
for  the  body,  and  have  the  good  luck  to  hold  its  opposition  to 
grasping  after  the  same  fringe, — the  conscience  and  enersry  of  the 
numerical  majority  will  ordinarily  stir  but  fitfully,  reputations  of  a 
certain  kind,  effective  in  the  ^ame  of  politics,  will  be  won  on 
fringe-twisting,  or  "tail-twisting,"  and  the  game  itself  go  merrily 
on.  Modern  history  furnishes  no  more  complete  case  of  bank- 
rupt statesmanship  than  that  practiced  habitually  by  Naooleon 
III.  throughout  his  reign  of  a  dozen  and  a  half  years.  Whether 
that  unfortunate  nephew  of  his  alleeed  uncle  was  the  author  or 
not  of  the  saying  attributed  to  him.  "The  wav  to  govern  France 
is  to  s"ive  her  a  p-ood  war  every  three  years," — he  contrived  to 
follow  substantially  that  plan  in  successive  staees,  marked  with 
the  'Crimean  War,  the  war  with  Austria,  the  ill-starred  expedition 
to  Mexico,  and  finally  the  war  with  Germany  which  cost  him  his 
throne,  France  her  military  prestige,  two  provinces,  much  blood, 
and  a  staggering  increase  of  her  national  debt,  in  which  figures 
the  star  item  of,  in  round  numbers,  one  thousand  million 
dollars,  as  a  cash  indemnity  to  Germany.  Never  was  the  blare 


28  HERTIG     ON     TAXATION. 

of  trumpets  worked  harder  to  distract  attention  from  the  admin- 
istrative features  of  a  government  which  was  at  once  feeble  and 
despotic.  Never  for  a  while — in  fact,  through  the  Crimea  and 
through  Solferino — was  blare  of  trumpets  worked  more  success- 
fully to  such  an  end.  Never  did  any  pretentious  o-overmnent 
make  plainer  confession  of  innate  weakness  than  did  that  ot  Na- 
poleon III.,  in  pandering  to  property  interests,  to  vested  and  non- 
vested  rights, — thereby  squandering  large  sums  of  the  people's 
money  in  covert  bids  for  popularity  or  otherwise,  as  when,  in 
acquiring  right  of  way  for  new  and  changed  streets  in  Paris, 
owners,  occupants  and  even  expecting-to-be  occupants  of  wanted 
grounds,  were  appeased  and  removed  with  a  liberality  that  would 
open  new  vistas  to  defendants  in  American  condemnation  pro- 
ceedings, and  with  a  fanciful  application  of  legal  principle  that 
would  open  new  realms  for  the  imagination  of  their  lawyers.* 

In  1869,  Napoleon  III.,  inspired  by  the  hundredth  anniversary 
of  the  First  Napoleon's  birth,  said  at  Chalons  to  tht  troops  there 
encamped:  "Soldiers,  I  rejoice  to  see  that  you  have  not  forgotten 


*Lecky,  in  his  Democracy  and  Liberty,  holding  that  governments  are 
bad  in  the  proportion  that  they  are  democratic,  looks  on  "the  regime  of 
the  present  French  republic  as  much  worse  than  that  ot  Napoleon  III. 
No  doubt,  during  the  first  half  of  his  reign,  Louis  Napoleon's  govern- 
ment .caught  the  multitude;  it  even  caught  such  shrewd  observers  as 
Walter  Bagehot.  There  was  prarasitic  paternalism  for  the  masses,  and 
low  taxes  for  the  classes.  "It  was,"  says  Lecky,  "the  policy  of  the 
Emperor  through  his  whole  reign  to  secure  the  popularity  of  his  gov- 
ernment by  keeping  the  taxes  low  and  unaltered,  and  meeting  the  grow- 
ing expenditure  by  constant  loans.  Almost  the  whole  cost  of  the  Cri- 
mean War,  the  Italian  War,  and  the  Mexican  expedition,  and  also  an 
immense  part  of  the  habitual  expenditure  of  the  Government  in  times 
of  peace,  were  raised  in  this  way.  The  extravagance  of  this  svstem  was 
in  part  concealed  by  the  complexity  of  French  financial  administration. 
*  *  *  *  I,  51.  What  Lecky  calls  "a  policy  of  judicious  free  trade" 
naturally  inclined  and  still  inclines  those  who  write  from  the  British 
standpoint  to  judge  the  Second  Empire  with  lenience.  Lecky  praises  it 
for  fostering  the  railway  system  and  for  the  "singular  intelligence"  with 
which  vast  sums  were  usually  expended  on  public  works.  But  he  con- 
cedes that  "it  was  a  government  with  no  real  constitutional  freedom, 
no  liberty  of  the  press,  no  liberty  of  public  meeting.  It  sheltered  or  pro- 
duced great  corruption,  and  repressed  with  arbitrary  and  tvrannical  vio- 
lence political  opponents.  It  was  detested  by  the  educated  classes,  by  the 
minority  of  the  population  who  seriously  cared  for  political  freedom,  and, 
in  spite  of  the  enormous  sums  that  were  expended  in  public  works  in 
Paris,  it  never  succeeded  in  winning  the  affections  of  the  Parisian  work- 
men. On  the  other  hand,  the  theory  of  paternal  government  exercised  in 
a  thoroughly  democratic  spirit  had  probably  never  before  been  carried  out 
with  equal  energy  and  intelligence."  I,  52.  It  is  precisely  because  the 
government  of  the  Second  Empire  affords  so  true  a  type  of  parasitic  pa- 
ternalism that  the  enlightened  paternalist  must  needs  condemn  it  with  se- 
verest judgment. 


HERTIG     ON     TAXATION.  29 

the  great  cause  for  which  we  fought  ten  years  ago  (at  Solferino.) 
Keep  always  fresh  in  your  hearts  the  remembrance  of  your  fath- 
ers' combats  and  of  those  combats  in  which  you  yourselves  have 
taken  part ;  for  the  history  of  our  wars  is  the  history  of  the  pro- 
gress of  civilization.  Thus  you  will  keep  up  the  military  spirit 
necessary  to  a  great  people.  That  spirit  is  the  triumph  of  noble 
passions  over  vulgar  passions ;  it  is  fidelity  to  the  flag,  devotion  to 
your  country.  Continue  as  in  the  past,  and  you  will  always  be 
worthy  sons  of  the  grand  nation." — Ap.  Littre,  sur  L'Etablisse- 
ment  de  la  Troisicme  Republique  (Paris,  1880),  pp.  6-7. 

Discourse  like  that  at  Chalons  has  the  very  stamp  and  hall- 
mark of  statesmanship  about  to  make  open  bankruptcy.  Compare 
to  the  great  advantage  of  him  who  overthrew  the  tottering  Sec- 
ond Empire,  Bismarck's  speeches  in  1884  in  support  of  the  Acci- 
dent Insurance  Bill.  Here  at  least  is  the  consciousness  of  facing 
a  great  and  permanent  question.  Bismarck  "admitted  at  the  out- 
set" that  the  German  parliament  "was  asked  to  join  the  govern- 
ment in  exploring  an  unknown  land,  and  that  the  difficulties  to 
be  encountered  would  increase  the  more  the  progress  made."  He 
made  bold  to  favor  compulsory  insurance  of  working  people 
against  old  age,  accident,  etc.,  and  to  draw  the  conclusion  that  the 
state  should  take  insurance  into  its  own  hands,  and  not  leave  it  to 
private  enterprise  which  really  meant  private  speculation  on  the 
misfortunes  of  the  laboring  population." — WILLIAM  HARBUTT 
DAWSON,  in  Bismarck  and  State1  Socialism  (London,  1891),  p. 
118. 

"The  whole  matter,"  said  Bismarck,  "centers  in  the  question, 
Is  it  the  duty  of  the  state,  or  is  it  not,  to  provide  for  its  helpless 
citizens?  I  maintain  that  it  is  its  duty,  that  it  is  the  duty  not 
only  of  the  'Christian  State,'  *  *  *  but  of  every  state." 
Again :  "I  care  not  that  this  doctrine  savors  of  Socialism.  If  an 
establishment  employing  twenty  thousand  or  more  work  people 
were  to  be  ruined  *  *  *  we  could  not  allow  these  men  to 
hunger.  We  should  have  to  resort  to  real  State  Socialism  and 
find  work  for  them,  and  this  is  what  we  do  in  every  case  of 
distress." — Id.  119. 

Does  it  seem  a  digression  from  the  main  highway  to  follow 
great  issues  as  embarrassing  bankrupt  statesmanship?  to  fetch  in 
Napoleon  III.  and  Bismarck  for  varying  illustration  of  that  prop- 
osition? I  but  lead  to  the  further  proposition,  which  I  want  to 
make  as  emphatic  as  possible,  that  the  kind  and  quality  of  states- 
manship is  put  on  final  proof  in  the  kind  and  quality  of  taxation 
it  puts  in  practice,  and  in  the  kind  and  quality  of  taxation  it  en- 
tails on  generations  to  come.  I  want  also  to  make  emphatic  the 
collateral  but  still  closely  related  proposition  that  noisy  agitation 


30  HERTIG    ON    TAXATION. 

of  questions, — in  form,  strictly  tax  questions, — may  well  cover  a 
great  barrenness  of  statesman-like  ideas.  And  in  that  connection 
I  may  as  well  make  confession  here,  for  personal  differentiation, 
that  my  particular  views  on  taxation  make  lock  step  with  my  par- 
ticular and  carefully  considered  views  on  the  theory  and  practice 
of  government — a  confession  which  shall  serve  as  warrant  for  a 
further  paragraph  or  two  on  the  relation  of  statesmanship  to 
issues. 

A  distinction  should  be  made  at  the  outset  between  issues 
great  in  themselves  and  issues  great  only  in  quantitative  results. 
Whoever  shall  say,  "Let  us  now  free  the  people  from  industrial 
slavery,"  brings  into  the  open  an  issue  great  in  itself,  though  he 
may  light  it  up  with  no  more  than  the  rushlight  of  an  ill-equipped- 
personal  understanding.  The  issues  underlying  the  wars  of  Na- 
poleon III.  were  of  almost  petty  simplicity,  though  fraught  with 
results  quantitatively  vast.  Of  almost  petty  simplicity  also  was 
the  slavery  side  of  the  issue  between  North  and  South  in  the  Civil 
War  of  1861-5.  You  shall  not  hold  chattel  slaves — We  will  hold 
chattel  slaves,  states  an  issue  so  simple  that  half  a  dozen  lines  of 
positive  law  are  enough  to  settle  it,  after  a  four  years'  war  brings 
one  of  the  belligerents  to  compulsory  acknowledgment  of  a  tri- 
bunal competent  to  write  the  half  a  dozen  lines.  The  issue  so 
stated  is  not  in  fact  barbarous,  and  yet  is  not  many  degrees  re- 
moved from  barbarous,  primitive  question  between,  let  us  suppose, 
disputants  in  the  same  tribe,  arguing  as  to  whether  a  certain  plun- 
dering expedition  should  be  undertaken  then,  or  postponed  to  a 
more  favorable  time.  The  moral  idealism  of  New  England  could 
shout  itself  hoarse  over  a  question  compressible  into  a  slogan,  and 
disposed  of  in  a  few  words  of  constitutional  amendment,  after  a 
war  computed  to  have  cost  nine  thousand  million  dollars ;  now, 
however,  the  moral  idealism  of  New  England  pipes  wonderfully 
thin  on  the  question  of  industrial  slavery,  which  may  not  be  de- 
creed away  in  half  a  dozen  lines,  but  must  needs  be  hunted  down, 
if  down-huntable,  with  a  code  seemingly  beyond  -Puritanic  Yan- 
keedom  to  give,  with  a  comprehensive  knowledge  of  human  na- 
ture clearly  beyond  unaided  Puritanic  Yankeedom  to  attain. 
Again :  A  distinction  should  be  made  between  issues  simple  in 
themselves,  and  issues  simple  as  stated,  yet  leading  to  no  way  out, 
issues  clouded  on  both  sides  with  foggy  vision,  with  wrath  and 
fear,  with  guileless  and  beguiling  expectation;  but  for  all  that, 
issues  struggling  for  civil  greatness,  issues  struggling  to  get 
away  from  the  old,  simple,  barbarous  atmosphere,  and  still  re- 
taining it  as  their  breath  of  life.  Thus  the  spurious  issue  of  1896, 
drawn  in  such  heat  and  acrimony,  fought  in  such  monumental 
hysteria,  such  expanse  of  fear  and  such  collapsible  balloon-like 


HERTIG    ON    TAXATION.  31 

hope,  was  indeed  remarkable,  but,  to  my  notion,  most  remarkable 
as  evidencing,  in  its  cloudier  connotations,  a  real  growth  away 
from  the  old,  simple,  semi-barbaric  issues ;  the  new  life  fired  the 
old  tongue,  but  could  not  rid  it  of  the  slogan-compelling  habil  ; 
and  so  the  cry  was  Silver!  The  election  of  Bryan  in  1896,  had 
he  been  elected,  would  have  made  it  plain  beyond  peradventure 
that  silver  had  been  already  sandbagged  into  incurable  cripple- 
dom.* 

But  now  when  it  is  said  that  by  the  Republican  victory  of  that 
year,  "the  American  people  *  *  *  were  saved  from  one 
of  the  greatest  perils  that  had  confronted  the  country  since  the 
days  of  the  great  rebellion,"  (Senator  KNUTE  NELSON'S  Speech, 
July  i,  1902),  those  of  us  who  accept  such  estimate  as  just  may 
well  ask  ourselves,  What,  if  anything,  is  current  statesmanship 


*A  revolution  may  well  grow  out  of  the  result  of  a  presidential  elec- 
tion, but  is  not  to  be  voted  in,  to  emerge  full-fledged  in  the  counting  of  the 
ballots.  Speculation  on  what  else  would  have  resulted  if  a  particular  event 
in  history  had  been  its  own  opposite,  is  of  course  useless  except  as  an  evi- 
dence of  how  one,  in  no  wise  excited,  surveyed  things  in  a  time  of  gen- 
eral excitement  and  apprehension.  While  1  thought  it  unlikely  that  Bryan 
would  be  elected,  I  could  not  look  on  his  election  as  a  very  remote,  possi- 
bility; and  1  believed  that  his  election,  should  it  happen,  would  have  been 
coupled  with  so  small  a  Bryan  majority,  if  any,  in  congress  that  a  free-sil- 
ver measure  would  have  found  in  the  end  enough  "weakness"  to  defeat  it. 
Most  bankers  thought  gold  would  command  an  immediate  premium  in  case 
of  Bryan's  election.  In  this  1  agreed  with  them,  but  rather  dazed  the  few 
with  whom  I  talked  on  the  subject  by  suggesting  that  such  premium  on 
gold  would  afford  a  ready  means  of  controlling  any  panic  as  between  banks 
and  their  depositors ;  that  if,  as  I  doubted  not  would  prove  to  be  the  case, 
bankers  and  others  should  hold  the  premium  reasonably  low  and  steady 
by  liberally  selling  gold  futures,  depositors  would  not  withdraw  their  funds 
to  speculate  in  gold  any  more  than  they  did  during  the  Civil  War ;  that  to 
avoid  paying  out  gold  or  its  equivalent  to  depositors  for  three  days  or  so 
would  be  the  only  gulf  at  all  difficult  to  bridge ;  that,  though  the  bull  head 
and  barren  brain  of  Grover  Cleveland,  then  president,  might  prove  to  be 
an  awkward  factor  by  standing  for  the  barren  ideal  of  gold  for  greenbacks, 
when  silver  dollars  for  greenbacks  would  just  fit  the  situation  and  still  the 
clamorous  demands  of  depositors  who  otherwise  might  be  feverish  to  rush 
with  greenbacks  to  the  sub-treasuries, — yet  perhaps  he  might  follow  a  hint 
from  the  camp  of  sound  money,  and  let  his  secretary  of  the  treasury  do 
what  it  had  been  rumored  that  secretary  would  have  willingly  done — pay 
out  silver  dollars  for  greenbacks,  and  show  thereby  that  Cleveland  Democ- 
racy was  no  longer  open  to  the  charge  of  discriminating  against  the  white 
metal  in  making  payments  and  redemptions  over  the  government  counters ! 
Resumption  of  gold  payments  and  cessation  of  scare  would  be  held  out  to 
congressman  as  an  inducement  to  "be  good ;"  and  two  years  of  disappoint- 
ed Democratic  expectation,  two  years  of  Republican  anger  would  combine 
to  produce  a  congressional  landslide  in  1898  twin  to  that  which  had  befallen 
the  Cleveland  administration  in  1894.  The  greatest  immediate  danger 
which  I  thought  might  impend  in  1896,  was  from  an  election  so  close  as 
to  be  determined  by  contested  electoral  votes. 


32  HERTIG    ON    TAXATION. 

doing  to  avert,  as  the  .aftermath  of  the  next  great  panic,  another 
contest  of  greater  gravity  on  issues  more  clearly  stated  and  appre- 
hended than  the  contest  and  the  issues  of  1896?  And  a  candid 
answer  must  be — nothing.  It  was  often  said  in  1896  that  silver 
was  but  a  stalking-horse  for  "anarchy"  and  other  forms  of  social 
disorder.  "Free  Silver,"  said  to  me  a  federal  judge,  "is  but 
another  name  for  Free  Riot ;"  Henry  George  said,  "The  contest  is 
now  on  between  the  Haves  and  the  Have-nots."  It  would  be  easy 
to  multiply  citations  showing  a  vivid,  if  not  always  a  clear,  con- 
sciousness that  there  was  much,  very  much,  more  than  silver 
at  issue  in  1896.  Now,  to  the  extent  that  silver  was  a  stalking- 
horse  for  other  and  deeper  issues,  it  is  plain  that  its  burial  in  a 
coffin  of  gold  or  otherwise,  affords  not  the  slightest  guaranty  that 
those  issues  will  not  spring  up  as  unsettled  as  ever;  the  right 
spark  ever  lurks  for  the  right  combustible ;  and  there  are  always 
stalking-horses  for  those  who  have  no  better  cavalry. 

As  aforesaid,  the  candid  answer  to  the  last  question  must  be — 
nothing.  We  are  indeed  making  hay  in  this  sunshine  of  prosperity, 
but  are  baling  only  a  very  limited  percentage  of  it  against  the  next 
panic.  For  now  a  round  half  century  the  Republican  has  been 
'the  sole  party  of  accomplishment,  or,  to  put  it  in  a -slightly  dif- 
ferent form,  the  only  party  to  accomplish  anything  in  the  United 
States.  It  is  one  thing  to  say  this,  and  another  to  award  due 
measure  of  praise  and  blame  for  what  has  been  done.  With  such 
award  I  have  at  present  nothing  to  do.  Without  being  "in  pol- 
itics," as  the  phrase  goes,  I  have  ordinarily  been  content  to  vote 
the  Republican  ticket,  because  looking  upon  government  by  that 
party  much  as  if  it  were  the  predestinated  and  exclusive  instru- 
ment for  making  a  large,  an  inevitable,  and  in  many  respects,  a 
very  luminous  chapter  in  the  history  and  evolution  of  this  coun- 
try, and  incidentally  of  the  world.  What  I  think  of  the  federal  Con- 
stitution as  rewritten,  or  rather  reinterpreted,  by  the  Republican 
party  will  be  told  in  my  work  on  that  instrument.  But  how  I 
grasp  one  phase  of  the  difficulty,  the  delicacy  and  the  inevitable- 
ness  of  our  "colonial"  problems,  may  be  briefly  outlined  here.  I 
will  not  enlarge  on  my  horror  of  cruelty  in  any  shape,  from  any 
quarter,  in  any  form;  I  have  no  stomach  to  dwell  on  the  real  and 
alleged  cruelties  attendant  upon  our  war  in  the  Philippines;!  will 
not  for  a  side-light,  comment  on  Japan's  folly  in  transforming  her 
former  happy  people  into  a  wretched  and  wretch-making  collec- 
tive apery  of  Western  civilization ;  yet  I  do  not  hesitate  to  say, 
not  being  the  mouth-piece  for  partisan  utterance  nor  fettered  by 
party  limitations,  that  the  supremacy  of  the  United  States  in  the 
Philippines  must  be  established  and  maintained,  though  to  do 
so  it  should  cost  the  life  of  every  native  (man,  woman,  and  child), 


HERTIG     ON     TAXATION.  33 

in  all  the  islands.  I  say -and  write  must  be  in  the  philosophically 
necessary  sense  attendant  upon  prevision  of  what  will  be, — such 
"will-be"  going  not  to  the  extreme  limit  of-  cost,  but  to  the  simple 
fact  that  supremacy  will  be  established  and  maintained,  with  cost 
a  somewhat  uncertain  incident.  The  Filippinos  must  drain  this 
cup  of  manifest  destiny ;  and  it  is  much  to  be  regretted  that  their 
sentimental  American  friends  did  not  have  sufficient  of  the  op- 
portune quality  of  brain  to  tell  them  so.  Not  that  this  particular 
destiny  comes  in  personal  or  super-personal  shape;  for  it  comes 
only  as  attendant  upon  and  shaped  by  the  collective  qualities  of 
the  average  American.  For  the  rest,  he,  like  Panurge,  is  "the 
best  fellow  in  the  world"  ;  but  he  Goes  not  in  his  heart  care  a  straw 
for  the  lives  of  black  men  or  brown  men  who  die  out  of  his  im- 
mediate sight  and  neighborhood.  If  he  should  dream  that  the 
Filippinos  collectively  hung  by  a  single  strand  over  the  abyss  of 
Tophet,  and  that  he,  standing  near,  cut  that  strand,  he  would  prob- 
ably regret  in  the  morning  that  it  was  only  a  dream.  One  of  him, 
on  the  strength  of  private  letters,  assured  me  with  a  cheerful 
smile, — this  was  before  alleged  cruelties  over  there  had  become 
generally  agitated, — that  our  soldiers  were  now  "ripping  the 
Filippinos  up  the  back  in  great  shape,"  exterminating  them  a  vil- 
lage-full at  a  lick.  As  the  instrument  of  manifest  destiny  he  is 
near  to,  and  cheerful  over,  that  destiny's  ends.  State  Senator  S. 
A.  Stockwell,  of  Minneapolis,  can  tell  how  cheerfully  the  collec- 
tive American,  of  considerably  more  than  average  ability,  turned 
down  his  sentimental  resolution  in  March  last.* 

Neither  opportune  statesmen  nor  wise  philosophers  bewail 
the  atmosphere  or  the  constituents  which  they  cannot  change;  no 


*From  the  official  Journal  of  the  Minnesota  Senate  for  March  10, 
1902:  The  following  resolution  was  introduced  by  Senator  Stockwell: 

"WHEREAS,  There  appeared  in  the  Minneapolis  Sunday  Tribune^  of 
March  9,  1902,  a  Republican  newspaper,  an  interview  with  a  Republican 
congressman,  in  which  he  says,  among  other  things,  the  following: 

"  'But  the  Filipino  is  at  heart  in  a  state  of  rebellion  against  the  United 
States'  authority,  and  he  always  will  be.  You  never  hear  of  any  disturb- 
ances .in  northern  Luzon,  and  the  secret  of  its  ^pacification  is,  in  my  opin- 
ion, the  secret  of  the  pacification  of  the  archipelago.  They  never  rebel 
in  northern  Luzon  because  there  isn't  anybody  there  .to  rebel.  That 
country  was  marched  over  and  cleaned  out  in  a  most  resolute  manner. 
The  good  Lord  in  Heaven  only  knows  the  number  of  Filipinos  that  were 
put  under  the  ground,  for  our  soldiers  took  no  prisoners;  they  kept  no 
records;  they  simply  swept  fhp  country,  and  wherever  or  however  they 
came  upon  a  Filipino  they  killed  him.  The  women  and  children  were 
spared,  and  may  now  be  noticed  in  disproportionate  numbers  in  that 
part  of  the  island.  The  Spaniards,  differently  constituted,  would  go  out 
after  a  band  of  insurgents  for  a  day's  journey,  and  then  get  back  to 
barracks,  while  our  soldiers  have  pursued  them  persistently,  and  ^for  that 
reason  our  conquest  of  the  'archipelago  is  very  much  more  effective  than 


34  HERTIG    ON     TAXATION. 

statesman  is  opportune  nor  philosopher  wise  who  does  not  con- 
trive to  find,  and  ally  himself  with,  the  more  durable  features  of 
his  environment. 

We  shall  keep  the  Philippines  and  pacify  them.  To  make 
literally  a  desert,  and  call  it  peace,  will  not  be  done,  because  we 
shall  make  peace  a  long  way  this  side  the  extreme  limit  of  cost. 
No  ranker  failure,  from  the  standpoint  of  practical  politics,  was 
ever  made  than  the  crusade  in  the  first  session  of  the  57th  congress 
against  the  practice  and  policy  of  the  administration  in  the  Philip- 
pines. If  the  Democrats  had  chosen  to  profit  by  readily  accessible 
knowledge  of  the  average  American,  and  by  the  Emersonian  dic- 
tum, "The  ways  of  Providence  are  not  the  ways  of  a  white-chok- 
ered  student  of  divinity,"  perhaps  the  secretary  of  their  congres- 
sional campaign  committee,  hearing  from  the  chairman  of  country 
committees,  would  not  labor  under  the  disappointment  of  finding 
that  there  are  "but  few  calls  for  Philippine  speeches"  (Minne- 


that  of  Spain  ever  was.     I  look  for  no  real  peace  short  of  such  measures 
as  those  pursued  in  northern  Luzon. 

"  'But  will_  the  moral  sense  of  the  American  people  stand  a  policy 
of  extermination?' 

"  'I  dare  say.  The  American  people  have  stood  it  with  the  Indian, 
although  today  we  are  treating  him  pretty  well ;  he  is  a  star-hoarder,  and 
we  are  supplying  him  with  schools  and  all  sorts  of  things  he  has  no  use 
for.  We  are  planting  him  as  far  as  possible  on  the  lands  that  we  do 
not  wish  for  ourselves.  If  American  investors  find  property  thev  want 
in  the  Philippines,  I  do  not  think  they  would  be  embarrassed  by  any 
sentiment  at  home  againsf  sweening  off  the  Filipinos.  Our  vigorous 
policy  of  maintaining  law  and  order  would  never  be  designated  extermi- 
nation ;  party  platforms  and  party  organs  would  choose  some  gentler 
term;  but  as  I  gauge  the  American  sentiment,  there  was  no  real  opposi- 
tion to  the  course  pursued  bv  Funston  and  others  in  northern  Luzon. 
and  there  would  not  be  to  a  similar  course  in  the  rest  of  the  archinelago.' 
"AND,  WHEREAS,  The  above  statement  is  corroborated  by  undoubted 
evidence  and  is  a  true  statement  of  the  facts,  and 

"WHEREAS,  This  damnable  war  of  conquest  and  extermination 
is  costing  this  government  hundreds  of  lives  and  more  than  $00.000000 
annually  (enough  to  almost  build  a  trans-continental  railroad),  which 
is  taken  almost  wholly  from  the  toiling  masses  of  this  country,  and 

"Whereas.  But  one  result  can  follow  the  continuance  of  this  war, 
namely,  the  destruction  of  liberty  at  home  and  abroad : 

"Therefore,  Be  it  Resolved,  That  we  call  upon  the  President  of  this 
Republic,  as  Commander-in-Chief  of  the  Army  and  Navy  to  end  this 
cruel  war,  assuring  the  Filipino  patriots  that  it  is  our  purpose  to  grant 
them  independence." 

"Mr.  Ryder  [Rep.  of  Polk  County],  gave  notice  of  debate,  so  the 
resolution  went  over  [one  day],  under  the  rules." 

The  next  day,  March  nth,  was  the  last  of  the  session,  brief  nnd 
pro  forma  only.  However,  Senator  Stockwell  called  tin  his  resolution 
saying,  among  other  things,  "Too  well  I  know  that  it  will  fail  to  nnss." 
Only  thirty-three  senators  were  present  and  voted, — 12  for,  and  22  against, 
the  resolution. 


HERTIG    ON    TAXATION.  35 

apolis  Times,  July  5,  190?),  and  of  being  "rather  emphatically  in- 
formed that  the  people  are  earnest  in  standing  by  the  army." 
Democrats  and  Republicars  will  alike  be  pleased  with  President 
Roosevelt's  4th  of  July  speech  at  Pittsburg.  Most  of  them  will 
accept  as  final  his  statement  therein  that,  "speaking  broadly  and 
generally,  peace  has  come."  And  it  would  seem  as  if  the  Philip- 
pine question,  as  a  campaign  issue,  might  stay  down  for  the  full 
count  after  such  knock-out  blow  as  this :  "Today  the  proclama- 
tion of  peace  and  amnesty  has  been  promulgated,  and  at  the  same 
time  our  generals  have  been  notified  that  the- civil  government  is 
supreme  in  the  islands.  Does  that  not  speak  well  for  our  army, 
for  our  troops,  that  the  troops  of  the  people  should  war,  hoping 
for  a  triumph  which  is  to  put  power  into  the  hands  of  the  civil 
authorities?" 

But,  for  the  third  time,  I  say  nothing  is  being  done  against  the 
next  great  panic ;  and  very  important,  and  collateral  thereto  is  the 
fact  that  the  Republican  party  has  run  clear  out  of  issue  stock. 
Incidentally  something  is  heard  at  Republican  conventions,  as  at 
St.  Paul  the  other  day  from  Dar  Reese  in  gracefull)  accepting  his 
defeat  as  candidate  for  the  supreme  court  clerkship — that  we  are 
nearing  tremendous  questions;  and  the  president  of  the  United 
States  in  the  same  4th  of  July  speech  expressly  admits  in  relation 
to  trusts  and  the  department  of  justice,  that  we  here  face  "infinite- 
ly difficult  problems"  for  whose  practical  solution  "we  need  the 
highest  qualities  of  the  intellect,"  and  in  thousand-fold  greater 
ratio — "character."  It  must  be  reckoned  a  piece  of  great  good 
fortune  for  those  gentlemen  whose  political  fortunes  are  insep- 
arably bound  up  with  the  national  success  or  failure  of  the  Re- 
publican party,  and  whose  practical  conception  of  eternity  takes 
the  shape  of  an  endless  succession  of  four-year  periods,  that  they 
have  in  the  person  of  Theodore  Roosevelt  a  sufficient  substitute 
for  other  live  issues.  He,  at  least,  has  the  sufficient  fiVure  and 
prestige  of  knight  Ivanhoe  to  unhorse  Front  de  Boeuf  (Ox-head) 
Cleveland  or  such  other  Ox-head  as  the  Cleveland  Democracy  may 
select  as  their  champion — even  if  Bryan  should  not  be  found  to 
have  permanently  alienated  the  Democratic  masses  from  any  such 
Ox-head  leadership.  Bar  the  happening  of  the  unexpected  in  na- 
ture, in  finance,  and  in  issues,  the  Republicans  have  in  Roosevelt, 
if  they  choose  to  use  him,  a  reasonably  sure  winner  for  1904.  But 
after  Roosevelt — the  delude  !  There  is,  of  course,  amongst  other 
contingencies  the  not  very  remote  one  that  the  magnates  amongst 
the  Republican  bosses  will  prefer  to  take  uncertain  chances  with  a 
candidate  after  their  own  heart,  rather  than  accept  reasonably  sure 
victory  under  the  leadership  of  Roosevelt  for  whom  they  have  no 
love.  The  temptation  is  certainly  great;  they  have  fond  remem- 


36  HERTIG    ON    TAXATION. 

brance  of  McKinley  as  a  "bank  of  roses,"  and  besides  the  trusts 
will  consent  to  have  fried  out  of  them  an  enormous  campaign 
fund  for  a  Republican  candidate  of  their  own  choice,  or  at  least  of 
their  own  liking ;  and  where  else  is  a  sufficient — sufficient  as  meas- 
ured by  "recent  standards — campaign  fund  for  1904  to  be  picked 
up  ?  Roosevelt,  from  the  trust  stand-point,  or  that  of  other  very 
large  moneyed  interests,  will  be  acceptable  only  as  a  hard  choice — 
as  the  lesser  of  two  evils.  As  between  Roosevelt  and  Ox-head 
Cleveland,  or  any  man  after  Cleveland's  heart,  the  trusts  will  not 
hestitate ;  they  do  not  need  to  be  told  that  Cleveland  is  compara- 
tively "safe" ;  the  dullest  ox  has  some  recognition  of  the  source 
of  his  stall-fed  privileges. 

The  dilemma  of  the  Republican  magnates  as  between  their  own 
choice  and  the  choice  of  the  Republican  masses  is  most  interest- 
ing. Certain  advantages  in  heeding  the  latter  choice  are  very 
palpable.  The  arrows  of  negative  criticism  may  be  made  very 
keen ;  Republican  statesmanship  presents  in  spots  more  than  one 
soft  mark ;  but  with  the  stout  counter-fire  of  Roosevelt,  and  the 
protecting  mail  of  recent  and  positive  achievement  over  its  vitals, 
the  party  is  sufficiently  protected,  for  the  present,  against  the 
shafts  of  guerilla  bolomen.  And  then  Roosevelt,  manifestly  a 
better  campaigner  on  the  trust  question  than  any  Cleveland  Derno- 
cratt,  will  certainly  hold  his  own  on  that  question  with  anyone 
from  the  Bryan  wing,  and  is  as  likely  as  any  one  to  score  oc- 
casionally with  that  extremely  low  trump — tariff-reform.  But 
on  the  other  hand,  that  one-time  "bank  of  roses"  in  the  White 
House,  our  campaign  fund,  our  personal  ambition ! 

I  return  to  the  main  proposition  of  nothing  doing,  and  the  is- 
sue table  swept  clean  of  the  old,  simple  semi-barbaric  questions. 
Nothing,  for  the  rest,  shows  more  plainly  the  lowness  of  the  issue 
exchequer  than  the  fact  that  good  Republicans,  able  Republicans, 
are  now  picking  crumbs  from  that  barren  table  of  tariff-reform, 
which  so  truly  corresponds  with  the  hide-bound  barrenness  of  the 
Clevelandesque  brain.  That  the  immediate  barrenness  of  tariff- 
reform  was  caught  from  Cleveland,  and  is  not  inherent  in  the 
question  itself  is  a  proposition  which  I  leive  to  Colonel  Henry 
Waterson  for  piquant  argument.  It  is  for  Republicans  to  ask  and 
answer:  Is  1894,  its  Wilson  tariff,  its  «reat  fall  landslide  fro^rn 
Cleveland — is  all.  that  such  ancient  historv  ?  Is  the  Ding"ley  tariff 
of  1897,  crowning,  in  specially-called  session  of  congress,  the  vic- 
tory of  1896 — is  that  tariff  already  decrepit?  Is  the  main  artillery 
cast  and  fired  for  McKinley  and  prosperity,  to  go  so  soon,  and  in 
all  the  freshness  of  its  five  years,to  the  scrap-heap  or  the  melting 
pot?  Because  Jew  Isaac  charges  a  little  high  for  use.  of  the  gal- 
lant steed  Protection,  shall  now  Ivanhoe  Roosevelt  change  his 


HERTIG    ON    TAXATION.  37 

mount  for  a  cheap  Cleveland  hack  ?  Or  is  there  not  rather  some 
murmur  from  cave  of  Demogorgon  soon  to  be  translated  into 
articulate  cry  of  "A  plague  on  both  your  houses,  on  both  your 
horses!"  This  last  is  as  it  may  be,  and  a  story  for  other  place 
and  time;  but  it  is  certain  that  meanwhile  some  political  econo- 
mists and  some  others  are  threshing  from  their  particular  fields 
a  rather  light  straw  of  taxation,  and  with  most  serious  mien  are 
puffing  the  chaff  of  it  for  next  years'  seed ;  and  it  is  certain  also 
that  meanwhile  Republicans,  Bryan  Democrats  and  Populists,  in 
proportion  to  their  respective  numbers,  are  recruiting  grounds  of 
like  promise  for  the  right  man  and  the  right  issues — when  he  with 
them  shall  appear.  Meanwhile,  too,  it  will  be  a  pity, — unless  a 
surprisingly  rapid  march  of  events  shall  put  the  matter  in  another 
light, — if  Roosevelt  is  not  allowed  to  demonstrate  that  the  limita- 
tions which  now  any  man  carries  to  the  presidency  of  the  United 
States,  and  especially  the  limitations  which  beset  him  throughout 
his  four  or  eight-year  period,  are  sufficient  in  number  and  strength 
to  nullify  practically  whatever  of  Ivanhoe  glory  and  Ivanhoe  good 
an  admiring  people  expect  to  result  from  his  knightly  qualities — 
however  those  qualities  might  shine  on  hoof-resounding  prairie  or 
fire-swept  hill. 


CHAPTER  II. 


Taxation  as  Caviare  to  most  economists — What  strict  individualists  might 
allow  to  be  taxation — The  danger  in  definitions— Dr.  Johnson's  "Taxa- 
tion No  Tyranny" — Author  praises,  'but  rewrites  Johnson's  statement 
of  the  right  to  tax,  and  his  definition  of  tax — No  tax  law  or  any  law 
legally  unjust,  though  it  may  be  mischievous  in  effect — Illustrative  tax 
definitions. 


And  now  from  the  bankruptcies  of  statesmen  and  statesman- 
ship to  a  line  of  bankruptcies  by  those  who  delight  to  hector 
statesmen — the  political  economists — a  line  through  and  about 
taxation  and  the  immediate  field  of  my  subject.  One  need  not  be 
a  disciple  of  David  A.  Wells — an  economist  himself,  though  the 
name  is  of  very  scattering  significance, — to  agree  with  Wells  iu 
the  following  certificate  of  bankruptcy  issued  by  him  to  "most 
economists,"  and  covering  their  insolvency  in  tax  matters :  "In 
no  department  of  economic  science  is  there  *  *  *  so  much 
obscurity  and  conflicting  opinion  [as  in  the  department  of  taxa- 
tion.] Most  economists  teach  that  there  is  'no  science  of  taxation 
as  there  is  a  science  of  exchanges' ;  and  'that  there  are  no  great 
natural  laws  running  through  and  controlling  taxation  and  its 
effects. ' '  —Theory  and  Practice  of  Taxation  (New  York,  1900), 
p.  197.  Most  economists  it  may  be  added,  would  now  take  higher 
rank  with  the  critical  reader,  if  each  in  his  field  had  been  as  diffi- 
dent regarding  his  particular  "science  of  exchanges,"  as  he  was 
confident  that  there  is  "no  science  of  taxation"  at  all.  Taxation 
lies  very  near  to  experience  and  emotion,  to  human  need  and 
human  greed ;  lies  very  near,  therefore,  to  the  most  persistent  and 
stubborn  things  in  the  world, — things  which  put  up  a  stout  and 
visible  resistance  to  the  gentlemen  who  would  juggle  with  formu- 
las, and  call  their  handiwork  science;  things  which  have  bowled 
over  many  an  economist  and  which  so  far  have  shut  out  my  other 
friends,  the  single-taxers,  from  even  an  opportunity  to  get  bowled 
over,  by  denying  them  any  innings  at  all.  But  taxation,  speaking 
from  the  platform  of  common  sense  and  discreet  opportunity, 
based  on  extended  and  heeded  experience,  speaks  with  as  clear  and 
articulate  voice  as  may  be  attained  by  any  department  of  govern- 


HERTIG    ON    TAXATION.  39 

ment  or  economics.  Whether  such  voice  be  named  the  voice  of 
"science"  or  not  is  a  matter  of  taste ;  better  heed  it  than  too  curi- 
ously consider  names  for  it. 

My  formula,  taxation  for  robbery,  taxation  for  revenue,  taxa- 
tion for  reform,  descriptive  within  certain  limitations  of  the  pur- 
pose and  result  of  taxation — was  not  framed  to  be  a  definition  of 
taxation,  but  to  aid  tax-imposer  and  tax-student  in  attaining  a 
clearer  consciousness  of  what  they  mean  and  want  when  they 
would  retain,  amend,  or  supplant  with  new,  the  current  systems 
of  taxation.  Strict  individualists,  if  there  are  any  now,  will 
doubtless  allow  that  taxation  is  the  collective  husk  of  measures 
and  men  surrounding  a  certain  variable  percentage  of  private 
money,  and  ripening  that  percentage  into  public  money,  where- 
upon taxation  is  done  with  the  particular  kernels  so  surrounded 
and  ripened,  and  statesmanship  steps  in  to  devour  them.  And  the 
strict  individualists  will  allow  that  the  moneys  so  surrounded  and 
ripened,  or  if  not  moneys,  the  things  in  kind  (as  tithe-pigs,  and 
the  like)  so  surrounded,  and  ripened  in  kind  into  public  or  quasi- 
public  till  or  barn — are  taxes.  I  do  not  say  that  strict  individual- 
ists, in  so  allowing,  would  quite  adopt  the  foregoing  as  their  own 
definition  of  taxation  and  taxes ;  but  merely  that,  in  so  allowing, 
they  would  hesitate  to  allow  that  anything  further  could  properly 
be  called  taxation  or  a  tax.  Some  of  them  no  doubt  would  not 
allow  as  much  as  I  have  said  they  would.  An  individualist  who 
agrees  with  the  supreme  court  of  the  United  States  and  many 
other  courts  that  taxes  must  be  levied  for  a  public  purpose,  would 
not  concede  that  levies  made  and  moneys  collected  in  the  name 
of  taxation  and  passing  through  the  public  treasury  only  to  be 
paid  out  for  a  purpose,  not  in  the  view  of  such  individualist  a  pub- 
lic purpose — are  in  fact  tax  levies  and  taxes ;  he  would  probably 
define  them  in  terms  of  robbery  and  swag.  These  illustrations 
are  sufficient  to  show  that  the  path  of  the  strict  constructionist 
and  strict  definer  is  beset  with  many  a  practical,  and  I  may  add, 
metaphysical  pitfall.  The  doctors  of  the  civil  law  had  in  mind 
certain  of  the  difficulties  attendant  on  definition  when  they  put 
forth  the  maxim,  "All  definition  is  dangerous."  Where  the  real 
thingness  of  a  thing  begins  and  ends  has  puzzled,  as  well  as  in- 
spired, many  a  philosopher  often  less  happy  in  indicating  and 
overcoming  the  difficulty  than  the  unpretentious  rhymester  who 
warbled : 

You'll  miss  a  precious  sight  not  to  see  our  Janet's  bonnet : 

Tis  not  sp  much  itself  as  the  ribbons  that  are  on  it ! 

The  definitions  of  a  tax  by  different  writers  are  practically  as 
numerous  as  the  writers  themselves.  Their  definitions  for  the 
most  part,  apply  to  and  imply  a  settled  state  of  things, — an  ac- 


40  HERTIG    ON    TAXATION. 

knowledged  government  and  its  unquestioned  right  to  tax.  The 
right  to  tax  is  of  course  co-extensive  with  the  duty  of  allegiance, 
and  may  be  extended  to  aliens  and  sojourners  who  owe  no  alle- 
giance; but  in  practice  the  right  of  the  state  or  sovereign  to  tax 
is  subject  to  many  curious  limitations  and  to  a  resistance  which 
protests  its  allegiance  while  resisting,  as  in  the  time  preceding  the 
Revolutionary  War  and  the  separation  of  the  American  Colonies 
from  Great  Britain.  The  right  to  tax  as  co-extensive  with  the 
duty  of  allegiance  is  interestingly  treated  by  Dr.  Johnson,  in  a 
tract  published  in  1775  opposing  the  declaration  of  rights  ancj 
claims  by  the  'Continental  Congress  at  its  session  held  in  Phila- 
delphia, September  5th  to  October  26th,  1774. 

According  to  -Dr.  Johnson  the  general  right  of  government  to 
tax  is  one  of  those  "fundamental  principles,  or  common  axioms 
which  being  generally  received  are  little  doubted,  and  being  lit- 
tle doubted  have  been  rarely  proved."  And  the  learned  doctor 
ponderously  opines  that  "of  these  gratuitous  and  acknowledged 
truths  it  is  often  the  fate  to  become  less  evident  by  endeavors 
to  explain  them,  however  necessary  such  endeavors  may  be  made 
by  the  misapprehensions  of  absurdity,  or  the  sophistries  of  in- 
terest." In  support  of  this  contention  he  makes  the  points: 

1.  "It  is  difficult  to  prove  the  principles  of  science,  because 
notions  cannot  always  be  found    more    intelligible  than  those 
which  are  questioned. 

2.  "It  is  difficult  to  prove  the  principles  of  practice,  because 
they  have  for  the  most  part  not  been  discovered  by  investigation, 
but  obtruded  by  experience." 

And  he  concludes  that  he  who  seeks  to  demonstrate  the  truth 
of  these  "fundamental  principles,  or  common  axioms,"  will  find 
after  hard  effort  (which  the  doctor  describes  as  "an  operose  de- 
duction"), "that  he  has  been  trying  to  make  that  seen  which  can 
be  only  felt."  Taxation  no  Tyranny;  an  Answer  to  the  Resolu- 
tions mid  Address  of  the  American  Congress  (1775). 

The  very  best  of  the  old  definitions  of  taxes  is  infolded  in 
Johnson's  dictum  that  government's  general  right  to  tax  "was 
considered  by  all  mankind  as  comprising  the  primary  and  essential 
condition  of  all  political  society,  till  it  became  disputed  by  those 
zealots  of  anarchy,  who  have  denied  to  the  parliament  of  Britain 
the  right  of  taxing  the  American  Colonies."  In  his  own  words 
infolding  said  definition,  the  right  which  he  says  was  so  "con- 
sidered by  all  mankind"  is  thus  stated :  "The  supreme  power  of 
every  community  has  the  right  of  requiring  from  all  its  subjects, 
such  contributions  as  are  necessary  to  the  public  safety  or  public 
prosperity.'-'  Later,  in  the  same  pamphlet,  the  doctor  makes  a 
formal  definition  of  "tax,"  not  quite  so  good  as  that  infolded  in 


HERTIG    ON    TAXATION.  41 

his  claim  of  governments'  general  right  to  tax.  "A  tax,"  he  says, 
"is  a  payment  exacted  by  authority  from  part  of  the  community 
for  the  benefit  of  the  whole."  And  to  this  definition  he  adds  a 
declaration  which  is  in  full  technical  vigor  in  the  domain  of  cur- 
rent jurisprudence,  except  as  modified  by  custom,  concession,  01 
constitution :  "From  whom,  -and  in  what  proportion  such  pay- 
ment [or  tax]  shall  be  required,  and  to  what  uses  it  shall  be  ap- 
plied, those  only  are  to  judge  to  whom  government  is  intrusted." 

Time  was  in  this  country  when  the  tract  of  Dr.  Johnson,  Taxa- 
tion no  Tyranny,  was  regarded  as  the  very  quintessence  of  talent 
ignobly  serving  official  tyranny.  It  is  very  curious  that  the  learned 
doctor  calls  "zealots  of  anarchy"  and  again  "impudent  congress 
of  anarchy"  that  Philadelphia  body  whose  successors  in  Washing- 
ton 127  years  later,  virtuously  wrestled  with  various  proposed 
bills  to  "stamp  out"  anarchy,  and,  the  fervor  of  official  mourning 
for  McKinley  having  passed  away,  adjourned  without  passing  any 
anarchist  bill  at  all !  It  is  perhaps  still  more  curious  that  any 
proposition  from  any  group  or  collection  of  persons  "within  the 
United  States  and  subject  to  the  jurisdiction  thereof"  to  modify  or 
limit  the  taxing  power  of  the  United  States  on  any  such  basis  as 
that  set  forth  by  the  Congress  of  the  United  Provinces  at  Phila- 
delphia, or  on  like  basis  proposed  by  others  of  the  fathers  before 
and  after  said  session  at  Philadelphia — would  in  official  circles  be 
held  to  be  sufficiently  answered  and  refuted  by  an  argument  sub- 
stantially along  Dr.  Johnson's  lines. 

To  return  to  Dr.  Johnson's  definitions  of  a  tax,  or  taxes,  it 
might  seem  at  first  blush  as  if  they  must"  be  such  (enforced)" 
"contributions  as  are  necessary  to  the  public  safety  or  public  pros- 
perity";  and  that  if  not  so  necessary  they  are  taxes  only  in  name, 
from  which  conclusion  some  would  draw  the  further  one  that 
when  they  are  taxes  only  in  name  the  people  have  the  right  to  op- 
pose by  force  their  collection.  But  the  doctor  means  no  more 
than  that  they  ought  to  be  so  necessary,  but  that  whether  they  are 
or  not,  "those  *  *  *  to  whom  government  is  intrusted"  de- 
cide in  advance  and  by  so  deciding  forever  settle  the  question  in 
the  affirmative.  In  claiming  the  right  of  the  supreme  power  to 
"tax  all  its  subjects,"  and  yet  defining  a  tax  as  "a  payment  ex- 
acted by  authority  from  part  of  the  community  for  the  benefit  of 
the  whole,"  the  doctor  makes  a  legitimate  distinction  between  the 
general  right  to  tax  (which  owns  to  no  exceptions  or  exemp- 
tions), and  a  particular  tax  as  levied,  or  imposed,  which  in  actual 
practice  is  rarely,  if  ever,  universal  as  to  any  class  of  property  and 
certainly  never  universal  as  to  persons.  The  doctor,  then,  defines 
in  effect  and  correctly  an  actual  tax  as  a  burden  imposed  by  public 
authority,  and  in  practice  falling  in  its  immediate  payment  upon 


42  HERTIG    ON    TAXATION. 

a  part  only  of  the  community.  His  adding  "for  benefit  of  the 
whole"  is  a  conclusion  of  moral  obligation  which  governments 
willingly  admit  on  the  lip  and  disregard  in  the  ledger.  He  could 
not  admit  that  some  taxes,  or  some  parts  of  some  taxes,  are  laid 
for  robbery,  for  that  would  encourage,  if  not  justify,  seditious 
thought ;  but  in  describing  the  purpose  of  a  tax  as  being  for  the 
"benefit  of  the  whole,"  Johnson  is  broad  enough  to  cover  nicely 
the  old  taxation  for  reform  laid  by  the  Romans  on  bachelors  to 
encourage  marriage,  and  broad  enough  to  cover  also  the  modern 
instances  of  taxation  for  reform.  His  definition  is  broad  enough, 
too,  for  the  inclusion  of  confiscation  by  taxation ;  it  is  plain  that 
if  authority  exacts  "from  part  of  the  community  for  the  benefit 
of  the  whole"  the  entire  property  of  such  part,  consisting,  let  us 
suppose,  of  railroads,  waterworks,  mines  and  the  like,  such  ex- 
action does  not  go  beyond  taxation  in  the  Johnsonian  sense  of  the 
word.  To  say  that  a  tax  is  a  payment  "exacted  by  authority"  is 
strictly  proper,  since  such  payment  is  not  voluntary  in  any  fair 
sense  of  the  word,  but  is  made  under  expectation  that  the  full 
power  of  government  will,  in  case  of  default,  be  used  to  enforce 
it.  Strictly  speaking,  the  Johnsonian  notion  of  taxation  is  not 
broad  enough  to  cover  those  cases  where,  in  the  name  of  a  tax, 
an  impost  or  excise  of  such  magnitude  is  imposed,  that  no  collec- 
tions from  it  are  expected,  but  rather  prohibition  of  the  importa- 
tion or  home  manufacture  and  sale  of  the  article  or  articles  so 
"taxed.  But  since  for  special  reason  or  by  special  fluke,  govern- 
ment seldom  indeed  fails  to  get  at  least  a  little  money  from  the 
operation  of  a  prohibitory  tax  law,  that  little,  by  stress  and  strain, 
just  contrives  to  bend  its  law  and  itself  into  literal  conformity 
with  Johnson's  notion  of  taxation  and  tax.  There  are  some  eco- 
nomists and  some  other  tariff-reformers,  who  would  like  to  add 
to  Johnson's  definition  of  tax  the  proviso,  "But  protective  tariff 
taxes  are  payments  exacted  by  authority  from  the  whole  of  the 
community  for  the  benefit  of  a  part."  Subject  to  such  limita- 
tions as  those  above  stated  or  hinted,  Johnson's  statement  of 
the  right  of  taxation  with  the  infolded  definition  of  tax,  and  his 
express  definition  of  tax,  are  very  good  and  complete — much 
more  so  in  fact  than  most  of  the  statements  and  definitions  in 
such  kind  by  other  writers.  I  would  restate  the  right  and  define 
the  tax,  as  follows :  "The  supreme  power  of  "every  community 
[consisting  of  the  effective  majority  therein]  has  the  right  of 
requiring  from  all  of  its  subjects  [indeed  from  all  of  its  inhabi- 
tants], such  contributions  [commonly  called  taxes]  as  are  [in 
the  judgment  of  such  effective  majority]  necessary  to  public 
safely  or  public  prosperity.  [Said  right,  and  the  amount, 
apportionment,  and  use  of  such  contributions,  or  taxes,  are 


HERTIG    ON    TAXATION.  43 

limited  only  by  the  amount  of  property  in  the  community 
and  by  such  customary  or  written  law  as  may  be  held  bind- 
ing on  itself  by  such  effective  majority, — right,  amount,  ap- 
portionment, and  use  being  subject  only  to  such  violent  or  other 
changes  as  may  occur  in  shifting  the  centre  of  such  effective  ma- 
jority, or  in  the  shifting  of  its  views  without  marked  change  of 
centre."] 

The  spirit  of  the  Johnsonian  definition,  both  as  given  by  him 
and  amplified  by  me  is  that  no  tax-law  can  be  unjust.  This  is 
quite  true,  but  only  in  the  sense  in  which  it  is  affirmed  by  Hobbes 
in  his  masterly  treatises  on  government,  that  "no  law  can  be  un- 
just,"— a  proposition  which,  as  Austin  says,  "has  been  deemed 
by  many  an  unusual  or  pernicious  paradox."  Austin,  speaking 
further  of  Hobbes's  proposition,  adds :  "If  we  look  at  the  scope 
of  the  treatises  in  which  it  occurs,  or  even  at  the  passages  by 
which  it  is  immediately  followed,  we  shall  find  that  the  proposi- 
tion is  neither  pernicious  nor  paradoxical,  but  is  merely  a  truism 
put  in  unguarded  terms.  His  meaning  is  obviously  this :  that  'no 
positive  law  is  legally  unjust.'  And  the  decried  proposition, 
as  thus  understood,  is  indisputably  true.  For  positive  law  is  the 
measure  or  test  of  legal  justice  and  injustice;  and,  consequently, 
if  positive  law  might  be  legally  unjust  positive  law  might 
be  unjust  as^  measured  or  tried  by  itself"  [which  would  be 
in  effect  the  suicide  of  the  law.] — Lectures  on  Jurisprudence 
(London,  1885),  I,  268.  A  law  may  be  inopportune,  or  un- 
wise, mischievous  in  its  direct  effect,  and  collaterally  in- 
jurious to  morals;  but  it  cannot  in  the  case  above  explained  be 
"unjust."  Laws  may  be  so  inefficient  or  positively  mischievous 
as  to  invite  to  revolution  and  the  overthrow  of  the  government 
that  makes  them;  still  they  are  not  technically  unjust.  If  they 
cause  rebellion  and  successful  revolution,  a  new  order  of  rights 
and  technical  justice  will  be  established  by  the  new  (or  shifted) 
effective  majority,  and  such  new  order  in  turn  will  embody  itself 
in  laws  which  cannot  be  "unjust."  Success  in  rebellion  and  rev- 
olution makes  the  patriot ;  want  of  success,  the  traitor.  In  a  con- 
tented and  law-abiding  nation  the  enacting  of  new  laws  and  the 
repealing  or  amending  of  the  old  suppress  those  abuses  which 
might  otherwise  be  lopped  off  by  the  sword  of  rebellion. 

I  now  cite  and  examine  a  cluster  of  French  definitions.  The 
dictionary  of  the  French  Academy  defines  tax  as  a  "public  charge, 
a  right  (dr'oit)  imposed  on  certain  things."  This,  like  most  dic- 
tionary definitions  is  very  vague  and  non-committal.  Littre,  the 
great  lexicographer,  in  his  monumental  dictionary  of  the  French 
fanguage,  defines  tax  first  in  the  meaning  of  the  word  according 
to  its  first  stage  in  modern  evolution :  "A  name  given  formerly 


44  HERTIG    ON    TAXATION. 

only  to  the  transitory  and  occasional  levies  of  rates  which  the 
government  imposed  for  the  needs  of  the  state."  Taxes  in  the  be- 
ginnings from  which  modern  Europe  has  been  evolved  were  at 
first  only  occasional,  not,  as  now,  annual  and  perpetual ;  revenues 
from  crown  lands,  the  public  domain,  so  to  speak,  of  king  or 
other  potentate,  were  thought  sufficient  for  ordinary  public  ex- 
penditures. Littre  adopts  in  second  place  the  above  definition  of 
the  Academy;  and  quotes  from  Raynal  this  further  definition  of 
tax :  "A  contribution  for  the  public  expense,  which  is  necessary 
to  the  preservation  of  private  property."  Mirabeau's  definition : 
"Taxes  are  but  advances  (made  by  taxpayers),  to  obtain  the  pro- 
tection of  the  courts  and  police."  Voltaire  describes  paying  taxes 
"as  employing  a  portion,  of  one's  property  to  keeping  up  the  re- 
mainder." The  Marquis  d'  Audiffret:  "A  sacrifice  asked  of  so- 
ciety for  the  protection  of  its  existence,  as  well  as  for  the  develop- 
ment of  its  power."  M.  du  Puynode :  "The  portion  which  each 
one  restores  to  the  common  treasury  to  assure  the  peaceable  en- 
joyment of  his  goods  (remainder  of  his  property)  and  respect  for 
his  person."  Proudhon:  "Tax  is  really  an  exchange  in  which 
the  state  gives  its  services  and  the  taxpayer  gives  hard  cash." 
Proudhon,  however,  makes  the  acute  observation  that  taxes  are 
the  price  exacted  by  the  state  for  continuing  to  monopolists  their 
privileges;  that  where  taxation  begins,  monopoly  is  already  in  full 
flower  by  its  ownership  of  land,  mines,  forests  and  waters;  that 
equality  of  taxation  is  an  idea  in  advance  of  social  conditions,  but 
would  work  to  just  results  only  if  all  fortunes  were  equal.  He 
argues  most  interestingly  that  under  any  plan  of  taxation  poverty 
gets  the  worst  of  it,  still  holds,  so  to  speak,  the  beggar's  wallet, 
while  the  rich  man  is  ever  the  object  of  governmental  solicitude. — 
System  of  Economic  Contradictions,  Ch.  VII. 

Emile  de  Girardin  following  Thiers,  held  pointedly  but  super- 
ficially with  him  that  "a  tax  is  and  should  be  nothing  more  than 
an  insurance  premium."  Montesquieu,  whose  Spirit  of  the  Laws 
was  a  book  much  admired  by  and  influential  with  certain  framers 
of  the  Constitution  of  the  United  States  gives  therein  a  definition 
of  public  revenues  which  has  largely  found  favor  with  his  coun- 
trymen, and  with  many  others.  Indeed  the  foregoing  French  def- 
initions are  little  more  than  a  paraphrase  of  his  definition  of  state 
revenues:  "The  revenues  of  the  state  are  a  portion  which  each 
citizen  gives  of  his  property,  to  have  the  remainder  in  safety,  or 
to  enjoy  it  more  agreeably." — Esprit  des  Lois,  Livre  Treizieme 
(Paris,  1867). 

J.  B.  Say,  a  French  economist,  who  was  much  moved  by  the 
abuses  of  the  taxing  power  defined  a  tax  as  "a  calamity."  Paul 
Leroy-Beaulieu  has  made  perhaps  the  best  of  the  French  defini- 


HERTIG     ON     TAXATION.  45 

tions,  best  for  precise  formality,  but  rigidly  excluding  all  refer- 
ence to  collateral  purpose  as  well  as  paramount  end  of  govern- 
ment. "A  tax,"  he  says,  "is  the  contribution  exacted  of  each  citi- 
zen for  his  share  of  the  government  expenditures."  If  the  words 
"exacted  of  each  citizen"  seem,  at  first  thought,  too  broad,  the  ob- 
jection may  be  answered  in. a  second  thought  that  whoever  con- 
sumes, though  he  be  a  beggar,  pays  at  least  a  consumption  tax 
out  of  his  begging's  whenever  and  wherever  he  buys  with  them. 
So  also,  as  the  words  "exacted  of  each  citizen"  are  none  too  broad, 
the  word  "contribution"  as  representative  of  what  is  exacted,  is 
none  to  narrow,  it  being  fairly  applicable  to  money,  to  payments 
in  kind,  and  to  payments  in  work  or  service.  Contribution  as  a 
name  for  tax  came  into  common  use  with  the  French  revolution, 
as  being  free  from  the  old  harsh  associations  connected  with  the 
old  name,  and  implying  that  the  citizen  in  a  free  state  should  re- 
gard his  payments  as  in  large  measure  voluntary.  But  this,  of 
course,  is  merely  sentimental  and  decorative,  and  not  even  as  ef- 
fective as  turning  the  cracked  side  of  a  vase  toward  the  wall, 
which  turning  may  at  least  deceive  the  spectator ;  while  contribu- 
tion coupled  with  the  words  "exacted"  or  "enforced"  neither  de- 
ceives nor  can  deceive  as  to  the  compelling  hand  behind  it.  For 
the  rest,  contribution  as  a  name  for  tax,  dates  even  in  English  use 
from  a  time  much  before  the  French  Revolution,  and  is  very  cur- 
rent. Daniel  Webster  and  Justice  Story  (as  Justice  Samuel  F. 
Miller  states  in  his  lectures  on  the  Constitution)  defined  tax  as  "a 
contribution  imposed  by  government  on  individuals  for  the  ser- 
vice of  the  state." 


CHAPTER  III. 


To  serve  God  and  Mammon  through  tax  laws  an  easy  matter  for  Prof. 
Perry — Purchase,  benefit  and  other  exchange  theories  of  taxation  super- 
annuated— Simple  and  permanent  basis  for  condemning  such  theories 
— False  individualist  assumption  underlying  them  exploded. 


Nothing  in  tax  literature  is  more  touchingly  naive  and  sloppy 
than  the  brief  chapter  on  Taxation  in  Prof.  Arthur  L.  Perry's 
Elements  of  Political  Economy,  first  ed.  (New  York,  1866).  As 
the  book  went  through  nineteen  editions  and  various  changes,  in 
one  or  more  of  which  Perry  utters  the  despairing  cry,  There  is 
"no  science  of  taxation  as  there  is  a  science  of  exchanges"  (quoted 
by  Wells,  p.  38,  above,  and  credited  only  to  "most  eco- 
nomists"), some  specimen  of  the  flower  of  Perry's  genius  before 
it  was  yet  unduly  remote  from  the  bud,  seems  due  to  my  readers, 
especially  as  Perry,  too,  sees  an  exchange  transaction  in  paying 
taxes.  Perry,  moreover,  takes  a  first  halting  step  away  from  indi- 
vidualism, yet  not  far  enough  to  look  with  approval  on  any  tax 
measure"  that  would  take  from  the  rich  man  any  greater  percent- 
age of  the  fruit  of  his  "abstinence"  and  "thrift"  than  that  taken 
from  the  king's  poor  cousins.  Like  trustees  of  other  colleges, 
those  of  Williams  are  doubtless  thrifty  and  pious.  With  their 
professor  of  Political  Economy  sound  on  "thrift,"  what  writer 
could  take  exception  to  this  halting  step  from  individualism,  with 
truly  pious  knee-crook,  toward  latent  paternalism.  "Government 
exists  as  well  for  the  improvement  as  for  the  protection  of  society 
and  many  of  its  high  functions  are  moral,  to  be  performed  under 
a  lofty  sense  of  responsibility  to  God  and  to  future  ages."  Thus 
delivered  and  so  squared  with  his  trustees,  Perry  can,  and  does, 
proceed  to  vindicate  the  ways  of  government  to  man  in  "the 
matter  of  taxation."  This,  he  says,  "by  which  government  is  out- 
wardly supported  and  by  which  it  takes  to  itself  a  part  of  the 
gains  of  every  man's  industry,  seems  to  me  to  find  a  ready  and 
solid  justification  in  the  common  principles  of  exchange.  A  tax 
paid  is  a  reward  for  a  service  rendered ;  and  because  the  service 
may  have  respected  another  generation  as  well  as  the  present,  it 
is  sometimes  proper  that  the  tax  shall  be  passed  over  in  part  to 


HERTIG    ON     TAXATION.  47 

another  generation  to  pay.  The  services  which  government  ren- 
ders to  production  by  its  laws,  courts,  and  officers,  *  *  *  are 
rendered  on  the  whole  economically  and  satisfactorily.  Taxes, 
therefore,  demanded  of  citizens  by  a  lawful  government  which 
tolerably  performs  its  functions,  are  legitimate  and  just  on 
principles  of  exchange  alone.*" 

Now,  however,  the  professors  are  making  a  square  turn  from 
the  purchase  theory  of  a  tax  (notion  that  it  is  a  payment  to  the 
-government  for  service  rendered  in  amount  equal  to  the  cost  of 
the  service);  also  from  the  benefit  theory  of  a  tax  (notion  that  "a 
tax  is  a  payment  by  .citizens  to  the  state  on  account  of  and  in  pro- 
portion to  the  benefit  received.")  Indeed  Prof.  Seligman  with 
ruthless  readiness  to  jar  the  feelings  of  Prof.  Perry  and  others 
impaled  on  their  own  rusty  standpoints,  does  not  scruple  to  write : 
"Until  within  a  few  years  it  was  deemed  necessary  to  base  the 
theoretical  justification  of  taxation  on  fanciful  doctrines  of  con- 
tract, of  protection  and  the  like." — Essays  in  Taxation,  5.  The 
advance  from  the  individualist,  "or  restrictive  theory  of  govern- 
ment which  prevailed  in  the  early  portion  of  the  igth  century," 
toward  the  paternalist  theory  may  be  measured  in  part  by  the  fact 
that  grave  professors  condemn  the  "benefit  theory  of  a  tax,"  be- 
cause, "like  the  purchase  theory  of  taxation,  it  rests  upon  the  in- 
dividualistic conception  of  society." — H.  C.  ADAMS,  The  Science 
of  Finance,  299. 

The  simpler  and  the  permanent  reason  for  condemning  the  in- 
surance theory,  purchase  theory,  benefit  theory,  or  any  other  ex- 
change theory  of  taxation  (except  in  those  cases  where  govern- 
ments take  fees  for  a  specific  service  rendered,  or  privilege  ac- 
corded), is  that  governments,  as  we  now  conceive  them,  impose 
taxes  because  they  must,  or  cease  to  exist ;  while  the  taxpayer 
pays  because  he  must,  or  suffer  consequences  which  he  can  in 
general  not  choose  to  endure.  In  other  words,  there  is  in  tax- 
paying  and  tax-taking  the  plain  fact  of  contact  without  contract, 
though  the  amount  taken  is  sometimes  fixed  by  contract  between 
the  state  and  the  taxpayer ;  and  it  is  always  useless,  often  mis- 
chievous, to  blink  plain  facts.  For  the  rest,  the  underlying  as- 
sumption and  falsehood  of  all  individualists  is  that  "the  end  of 
every  government  is  to  institute  and  protect  property" — a  propo- 
sition that  has  received  due  logical  pulverization  at  the  hands  of 
John  Austin.  He,  in  a  note  to  his  sixth  lecture,  "The  Province 
of  Jurisprudence  Determined,"  serves  the  "propounders  of  this 
absurdity"  with  summary  but  luminous  process^  He  first  puts 
the  proposition  for  them  into  a  very  general  and  dignified  form, — 
"To  confer  on  its  subjects  legal  rights,  and  to  preserve  those 
rights  from  infringement,  is  the  end  of  every  government."  Then 


43  HERTIG    ON    TAXATION. 

proceeding  to  demolish :  "If  the  creation  and  protection  of  legal 
rights  were  its  [government's]  proper  paramount  purpose,  its 
proper  paramount  purpose  might  be  the  advancement  of  misery, 
rather  than  the  advancement  of  happiness ;  since  many  of  the  legal 
rights  which  governments  have  created  and  protected  (as  the 
rights  of  masters,  for  example,  to  and  against  slaves),  are  gener- 
ally pernicious,  rather  than  generally  useful.  .  To  advance  as  far 
as  is  possible  the  common  happiness  or  weal"  [is  the  "proper 
paramount  purpose"  of  government;  and  to  that  end]  "a  govern- 
ment must  confer  on  its  subjects  *  *  *  beneficent  legal 
rights,  or  such  legal  rights  as  general  utility  commends,  an4 
*  *  preserve  those  rights  from  infringement,  by  enforcing 
the  corresponding  sanctions.  But  the  institution  and  protection 
of  beneficent  legal  rights,  or  of  the  kinds  of  property  that  are 
commended  by  general  utility,  is  merely  a  subordinate  and  in- 
strumental end  through  which  the  government  must  accom- 
pish  its  paramount  or  absolute  purpose.  *  *  *  The  propo- 
sition in  question,"  putting  for  government's  paramount  end 
a  merely  subordinate  and  instrumental  end,  "is,  therefore, 
false;  and  considered  as  a  definition  of  the  means  to  such 
paramount  or  absolute  end,  it  is  defective.  For  there  are 
absolute  legal  duties,  or  legal  duties  without  correspond- 
ing rights,  that  are  not  a  whit  less  requisite  to  the  advancement 
of  the  general  good  than  legal  rights  themselves  with  the  relative 
duties  which  they  imply."  Lectures  on  Jurisprudence,  I,  292-3. 
"The  sum  of  the  subordinate  ends  which  may  subserve"  govern- 
ment's paramount  end,  "is  scarcely  comprised  by  a  good  legisla- 
tion and  a  good  administration  of  justice,"  by  furnishing  judge, 
sheriff  and  policeman.  "The  prevalent  mistake,"  continues  Austin 
(ibid.)  "which  I  now  have  stated  and  exemplified,  is  committed  by 
certain  of  the  writers  on  *  *  *  political  economy,  whenever 
they  meddle  incidentally  with  the  connected  science  of  legislation. 
Whenever  they  step  from  their  own  into  the  adjoining  province, 
they  make  expressly,  or  they  make  tacitly  and  unconsciously,  the 
following  assumption:  that  the  proper  absolute  end  of  a  sovereign 
political  government  is  to  further  as  far  as  possible  the  growth 
of  the  national  wealth.  If  they  think  that  a  political  institution 
fosters  production  and  accumulation,  or  that  a  political  institu- 
tion damps  production  and  accumulation,  they  pronounce,  without 
more,  that  the  institution  is  good  or  bad.  They  forget  that  the 
wealth  of  the  community  is  not  the  weal  of  the  community,  though 
wealth  is  one  of  the  means  requisite  to  the  attainment  of  happi- 
ness." 


CHAPTER  IV. 


Tax  definitions  an  open  pitfall  for  Judge  Cooley — Habit  makes  it  easy  for 
the  Century  Dictionary  to  fall  with  him — Wells  goes  further  and  fares 
worse — Specimens  of  intellectual  anarchy  that  call  for  stamping  out — 
Entire  wealth  of  country  exposed  to  taxing  power — Naive  remarks  of 
W.  E.  H.  Lecky. 


The  late  Justice  Cooley  began  his  work  on  the  Law  of  Taxa- 
tion by  defining  taxes  "as  being  the  enforced  proportional  con- 
tribution of  persons  and  property,  levied  by  the  authority  of  the 
state  for  the  support  of  the  government,  and  for  all  public  needs." 
Cooley's  definition  is  at  once  labored,  slovenly  and  incorrect.  In 
the  phrase  "contribution  of  persons  and  property"  does  "contribu- 
tion of  persons"  mean  "contribution  (consisting)  of  persons,"  as 
if  a  slave-owner  were  made  to  deliver  of  his  slaves  in  payment 
of  such  contribution  ?  When  the  supervisor  of  a  highway  district 
gathers  the  adult  male  inhabitants  thereof  to  "work  out"  their 
road  tax,  has  he  in  hand  a  "contribution  of  persons"  in  Cooley's 
sense  of  the  phrase?  In  using  the  phrase  and  joining  with  it 
"property"  in  the  same  connection,  did  he  anticipate  that  extreme- 
ly infallible  economist  Edward  Atkinson,  who  says,  "Taxation 
means  work,  of  the  head,  of  the  hands  or  of  the  machine,  or  all 
combined?"  If  he  meant  to  distinguish  between  contribution  of 
persons  and  contribution  of  property,  it  would  seem  that  he  ought 
to  have  been  precise.  If  he  meant  to  say  that  taxes  are  propor- 
tional contributions  in  personal  service,  in  money,  and  in  kind, 
levied  and  enforced  by  the  authority  of  the  state,  perhaps  he 
thought  that  he  did  so  express  himself — an  illustration  of  how 
wide  a  conscientious  judge  may  shoot  from  the  mark  of  his  in- 
tent. Perhaps  some  recollection* of  classical  studies  made  him 
deliver  an  ambiguity  common  enough  in  the  Latin  language, 
where,  for  instance,  fuga  hominum-  may  be  either  'the  escape 
from  men,'  or,  'the  flight'  or  'escape  of  men.' — ZUMPT'S  Latin 
Grammar,  tit.  genitive  case,  art.  423,  n.  I.  Besides  what  is  gained 
by  the  use  of  the  word  "proportional,"  in  defining  tax  ?  Propor- 
tional to  what  ?  Everybody  knows  that  tax  contributions  vary  in 


50  HERTIG    ON     TAXATION. 

general,  and  particularly  in  theory,  with  the  purse  of  the  tax  con- 
tributor; but  nobody  knows  the  theoretical  proportion  of  such 
variations  without  a  tolerably  comprehensive  study  of  tax  statutes 
and  tax  decisions,  and  nobody  knows  the  true  proportion  of  such 
variations  unless  he  has  omniscient  judgment  of  values  and  in- 
fallible eye  to-  see  the  tax  contributor's  assets.  "Proportional," 
therefore,  adds  no  value  to  the  definition,  is  practically  meaning- 
less, and  is,  moreover,  false  in  its  intended  meaning.  For  special 
instance  of  such  falsity  take  poll-taxes.  These,  as  generally 
levied,  mean  contributions  equal  each  to  each  exacted  by  govern- 
ment from  each  poll  declared  taxable  under  the  edict  or  statute 
authorizing  such  tax;  and  they  are  not  "proportional"  to  any- 
thing, even  in  theory,  unless  to  the  judgment  or  lack  of  judgment 
authorizing  them  to  be  levied — which  would  give  a  meaning  seem- 
ingly out  of  all  proportion  to  that  intended  by  the  learned  judge. 
If  most  constitutions  of  the  American  States  afford  any  criterion 
by  their  silence  as  to,  or  their  qualified  approval  of,  poll-taxes, 
the  constitution  of  Ohio  displays  on  that  subject  an  emotion  not 
at  all  "proportional"  to  its  gravity,  by  declaring  (const,  of  1802, 
and  by  repetition  in  const,  of  1851),  'That  the  levying  (of)  taxes 
by  the  poll  is  grievous  and  oppressive."  Again;  when  Cooley 
cites,  without  dissent  (ist  ed.  p.  128),  McCurdy,  J.,  in  Co-it  e  v. 
Society  for  Savings,  32  Conn.  173,  he  seems  to  approve  Mc- 
Curdy's  approval  of  doctrine  quoted  by  the  latter  from  previous 
Connecticut  cases :  "Taxes  are  at  best  arbitrary  and  unequal. 
Studied  discriminations  are  made  in  all  tax  laws  in  favor  of  or 
against  particular  persons  or  subjects,  or  trades,  or  business,  or 
institutions."  If  this  is  so,  why  preliminary  beguilement  of  the 
unsophisticated  tax  student  with  a  deceitful  "proportional  ?" 

Though  the  use  of  proportion  in  a  tax  connection  must  have 
become  known  to  Cooley  very  early  in  his  juristic  studies,  it  is 
apparently  from  the  opinion  of  Bigelow,  'Ch.  J.  in  Commonwealth 
v.  Savings  Bank,  5  Allen  (Mass.)  436,  which  Cooley  cites  and 
commends  among  others  as  not  going  "beyond  the  demands  of 
strict  accuracy,"  that  he  got  the  notion  of  inserting  "proportional" 
into  his  definition  of  taxes,  though  in  form  he  follows  almost 
literally  the  definition  in  58  Maine,  591.  Bigelow  said  among 
other  things :  "Under  every  system  of  taxation,  however  wisely 
and  carefully  framed,  a  disproportionate  share  of  the  public  bur- 
den will  be  thrown  on  certain  kinds  of  property,  because  they  are 
visible  and  tangible,  while  others  are  of  a  nature  to  elude  vigi- 
lance. It  is  only  where  statutes  are  passed  which  impose  taxes 
on  false  and  unjust  principles,  or  operate  to  produce  gross  in- 
equality, so  that  they  can  not  be  deemed  in  any  just  sense  propor- 
tional in  their  effect  on  those  who  are  to  bear  the  public  charges, 


HERTIG    ON    TAXATION.  51 

that  courts  can  interpose  and  arrest  the  course  of  legislation  by 
declaring  such  enactments  void." 

Bigelow,  of  course,  was  not  the  originator  of  "proportional," 
as  applied  to  taxes.  His  own  state  of  Massachusetts  had  before 
him,  and  has  yet,  a  provision  in  her  constitution  to  the  effect  that 
the  legislature  "shall  only  impose  proportional  and  reasonable 
taxes."  The  Alabama  constitution  of  1819,  her  first,  provided 
that  "  all  lands  liable  to  taxation"  within  her  boundaries  should 
"be  taxed  in  proportion  to  their  value"  ;  the  nice  sense  of  justice  of 
her  carpetbaggers  prompted  them  to  insert  in  her  constitution  of 
1867,  "All  taxes  levied  in  this  state,  shall  be  assessed  in  exact  pro- 
portion to  the  value  of  such  property,"  with  a  proviso  author- 
izing a  poll-tax  for  school  purposes  not  to  exceed  $1.50  on  each 
poll, — showing  that  the  framers  of  this  plank  knew  that  there  is 
neither  exact  nor  inexact  proportionality  in  a  poll-tax.  Califor- 
nia's constitution  of  1849,  ner  first>  provides  that  all  property  in 
the  state  "shall  be  taxed  in  proportion  to  its  value,"  and  this  plank 
is  repeated  in  her  (present)  constitution  of  1879.  Illinois  in  her 
first  constitution,  that  of  1818,  was  silent  on  taxation,  but  spoke 
in  her  second  one,  1848,  and  imposed  on  the  legislature  the  duty 
of  providing  "for  levying  a  tax  by  valuation,  so  that  every  person 
and  corporation  shall  pay  a  tax  in  proportion  to  the  value  of  his  or 
her  property."  This  is  repeated  in  the  present  Illinois  constitu- 
tion, that  of  1870;  'but  this,  as  well  as  the  constitution  of  1848 
gives  the  legislature  discretionary  "power  to  tax  peddlers,  auc- 
tioneers, brokers,  hawkers,  merchants,  *  *  *  showmen, 
jugglers,  inn-keepers,  grocery-keepers,  toll-bridges  and  ferries, 
and  persons  using  and  exercising  franchises  and  privileges,"- 
that  is  to  say,  power  to  tax  said  persons  and  things  in  such 
manner  as  the  legislature  should  from  time  to  time  de- 
termine. This,  too,  shows  that  the  notion  of  proportion- 
ality in  American  tax  law  has  reference  only  to  taxes 
based  on  a  valuation  of  property.  So  also  the  constitu- 
tion of  Missouri  (const,  of  1865,  art.  I,  sec.  30;  const,  of  1875, 
art.  x.  sec.  4),  has  a  plank  to  the  effect  that  "all  property  subject 
to  taxation  ought  to  be  taxed  in  proportion  to  its  value."  And 
this  plank  was  expounded  by  the  supreme  court  of  that  state, 
in  Glascow  v.  Rouse,  43  Mo.  489,  in  a  way  entitling  it,  in  Coo- 
ley's  opinion,  to  be  "copied  at  length":  "That  taxes  should  be 
uniform,  and  levied  in  proportion  to  the  value  of  the  property 
to  be  taxed,  is  so  manifestly  just  that  it  commends  itself  to 
universal  assent.  But,  notwithstanding  the  constitutional  pro- 
vision, there  are  some  kinds  of  taxes  that  are  not  usually 
assessed  according  to  the  value  of  property,  and  some  which 
could  not  be  thus  assessed;  and  there  is  perhaps  not  a  state 


52  HERTIG     ON     TAXATION. 

in  the  Union,  though  many  of  them  have  in  substance  the  same 
constitutional  provision,  which  does  not  levy  other  taxes  than 
those  imposed  on  property, —  [other  taxes,  in  no  fair  sense  of 
the  word,  proportional.]  Eveiy  burden  which  the  state  im- 
poses upon  its  citizens  with  a  view  to  revenue,  to  carry  on  the 
operations  of  the  state  government,  or  for  the  support  of  munic- 
ipal corporations,  is  a  branch  of  the  power  of  taxation,  whether 
imposed  under  the  name  of  a  tax  or  some  other  designation. 
The  license  fees  which  are  sometimes  required  of  those  who 
pursue  particular  employments  are,  when  imposed  for  revenue, 
taxes.  Lawyers  and  physicians  may  be  compelled  to  pay  a 
license  for  practicing  their  professions,  for  the  purpose  of  rev- 
enue; and  although  not  levied  on  the  property,  it  is  still  a  tax. 
Stamp  duties  are  taxes.  It  is  customary  to  require  that  cor- 
porations shall  pay  a  certain  sum  annually,  in  proportion  to 
their  capital  stock  paid  in,  or  by  some  other  standard,  which  is 
generally  fixed  for  mere  convenience.  It  therefore  seems  plain 
that  the  constitutional  requirement  that  taxation  upon  property 
shall  be  in  proportion  to  its  value,  does  not  include  every  species 
of  taxation."  And  certainly  it  seems  equally  plain  that  to  say 
of  taxes  generally,  they  are  "enforced  proportional  contribu- 
tions" is  a  downright  untruth  as  to  one  very  important  branch 
of  taxation  and  an  extremely  barren  and  unattainable  ideal  as 
regards  the  other,  or  property,  branch  of  taxation.  In  taxation, 
as  elsewhere,  the  proper  function  of  ideals  is  to  get  themselves 
realized  if  they  can.  When,  as  in  Cooley's  definition  of  taxes, 
they  go  masquerading  as  bones-and-body  reality,  it  may  afford 
precious  encouragement  to  idealists  generally  that  even  a  man 
so  of  the  dry-as-dust  type  as  Cooley  found  ideals  to  such  degree 
indispensable  that  he  deliberately,  or  rather  unavoidably  blinked 
the  facts  for  their  dear  sake.  His  so  "enforced  propor- 
tional contribution"  to  the  ideal  may  indeed  be  precious  in  their 
sight:  its  alleged  proportionality  is  worse  than  useless  in  a 
definition  of  taxes. 

The  learned  judge  was  almost  equally  unhappy  in  defining 
the  purpose  of  taxes  as  being  "for  the  support  of  the  govern- 
ment, and  for  all  public  needs."  Is  not  the  support  of  the  gov- 
ernment a  public  need?  It  would  seem  that  if  Cooley  had  been 
quite  sure  of  the  affirmative  he  would  have  finished  the 
clause  and  the  definition  with  the  words  "and  for  all  other 
public  needs,"  instead  of  leaving  to  his  readers  to  determine 
each  for  himself,  by  capricious  individual  choice,  in  accenting 
all  or  public,  whether  "the  support  of  the  government"  shall 
be  taken  to  be  itself  a  private  need  or  a  public  one.  But  assum- 
ing that  Cooley  meant  "and  for  all  other  public  needs,"  and  that 


HERTIG    ON    TAXATION.  53 

he  is  generally  so  understood,  would  he  not  have  done  better 
had  he  condensed  all  mention  of  the  purpose  of  levying  taxes 
into  the  simple  formula  "for  public  needs"?  Is  there  even  the 
slightest  shade  of  a  presumption  that  any  one  reading  such 
definition  would  not  know  that  "the  support  of  the  govern- 
ment" is  a  primary  public  need?  If  not,  why  so  much  sur-' 
plusage?  Again:  if  the  learned  judge  had  adopted  a  simple 
formula  of  purpose,  he  would  have  done  still  better  in  not  com- 
mitting himself  so  far  as  to  vouch  for  taxes  as  being  levied  for 
public  needs.  That  foolish  sort  of  optimism  which  shuts  its 
eyes,  or  makes  believe  to  shut  them  and  its  definitions  against 
the  plainest  facts — is  the  painted  idol  of  timid  and  servile 
minds.  Therefore  because  taxes  ought  to  be  for  public  needs, 
let  us  assert  and  stand  to  it  that  they  are  such,  nor  dare  to 
define  them  as  being  levied  for  public  needs,  as  well  as  (fre- 
quently) for  private  needs  masquerading  as  public  ones!  Let 
us  in  our  definition  carefully  suppress,  to  tuck  out  of  general 
sight  in  diffuse  commentary,  •  that  "public  needs"  as  often  put 
forth  are  such  by  tne  fiat  of  an  oligarchy,  which  neither  the 
real  public  nor  their  timid,  or  corrupt  or  by-legal-impediment 
-restrained  judiciary  can  effectively  and  according  to  the  real 
facts  declare  to  be  not  "public,"  or  effectively  declare  to  be 
mixed  needs,  partly  public  and  partly  private,  upholding  the 
former  and  defeating  the  latter.  Moreover  to  define  taxes  as 
being  for  "public  needs,"  and  there  end,  is  not  to  define,  bound 
and  limit,  but  to  open  wide  the  door  to  the  much-mixed  ques- 
tion, What,  even  in  the  measure  of  honest  and  discreet  intent, 
are  public  needs?* 

The  large,  but  none  the  less  (or  shall  we  say  rather  all  the 
more?)  on  that  account  loose-jointed  Century  Dictionary  has 

*For  further  illustration  of  the  saying,  "All  definition  is  dangerous," 
I  add  this  note.  In  criticising  Cooley's  definition,  I  had  only  his  first 
edition  before  me.  His  second  came  out  in  1886,  ten  years  after  the 
first.  Curious  to  see  whether  the  learned  judge  had  found  his  defini- 
tion satisfactory  enough  for  him  to  reaffirm  it,  I  have  gone  to  the  defini- 
tion given  in  his  second  edition,  and  find  that  it  varies  from  the  first. 
"Taxes,"  says  the  second  edition,  "are  the  enforced  proportional  con- 
tributions from  persons  and  property,  levied  by  the  state  by  virtue  of  its 
sovereignty  for  the  support  of  government,  and  for  all  public  needs." 
It  will  thus  be  seen  that  it  has  all  the  vital  defects  of  Cooley's  first  defi- 
^ition,  and  another  of  its  own.  Why  lug  in  "by  virtue  of  its  sovereign- 
ty?" The  people  are  sovereign  and  in  their  "collegiate  and  sovereign 
capacity"  constitute  the  state.  Or  we  may  put  it  otherwise ;  for  there 
is  a  considerable  assortment  of  metaphysical  formulas  that  may  be  used 
and  disputed  in  this  connection.  Cooley,  with  the  fatality  that  so  often 
steers  our  judges  into  bad  metaphysics,  if  it  steers  them  into  any,  makes 
one  abstraction,  the  state,  levy  taxes  by  virtue  of  another  abstraction,  its 
sovereignty !  Whereas,  as  we  all  know,  it  is  our  officials  that  levy  taxes. 


54  HERTIG    ON    TAXATION. 

''conveyed,"  in  Ancient  Pistol's  sense,  and  renovated  in  its  own, 
Judge  Cooley's  definition,  and  with  this  result:  [A  tax  is]  "An 
enforced  proportional  contribution  levied  on  persons,  property, 
or  income,  either  (a)  by  the  authority  of  the  state  for  the  sup- 
port of  the  government,  and  for  all  its  public  or  governmental 
needs,  or  (b)  by  local  authority  for  general  municipal  purposes." 
Bar  "contribution  of  persons  and  property,"  and  the  Century 
definition  has  all  the  Cooley  defects  underlying  its  own.  The 
interesting  gentleman  who  thought  that  among  the  ten  books 
he  should  be  allowed  to  take  with  him  on  banishment  to  some 
Robinson  Crusoe  island,  he  would  choose  him  the  Century  Dic- 
tionary, might  on  its  definition  of  "road"  (maritime)  settle  com- 
fortably down  to  the  conviction  that  the  sea  beating  about  his 
desert  home  was  all  "road"  in  very  truth;  might,  in  casting  his 
eye  over  the  definition  of  "rouble"  or  "ruble,"  wonder  vainly 
what  might  be  the  weight  and  fineness  of 'that  Russian  silver 
piece;  could  certainly  raise  him  no  question  over  unmentioned 
gold  roubles,  in  pieces  of  ten  or  .otherwise;  would  perhaps  be 
satisfied  with  the  statement  that  "the  paper  ruble  is  discounted 
at  about  50  cents"  ;*  and  might,  if  he  should  have  taken  little 
memory  and  less  analysis  to  his  island,  rest  upon  the  foregoing 
proud  definition  of  tax  and  the  finer-print  commentary  of  about 


Now,  if  Cooley  meant  to  put  the  abstract  for  the  concrete,  he  meant 
also,  if  he  was  consistent,  to  affirm  of  the  abstract  officialdom  so  mas- 
querading as  the  state,  that  said  officialdom  levies  by  virtue  of  its  sov- 
ereignty. Hence  officialdom  is  sovereign! — a  conclusion  which  Cooley, 
on  cross-examination,  would  have  doubtless  denied.  The  formula  of  his 
first  definition  in  this  behalf,  "levied  by  the  authority  of  the  state,"  is 
unobjectionable,  because  it  is  true.  As  authority  for  both  definitions  he 
cites  Opinions  of  Judges,  58  Maine,  591,  where  the  justices  of  the  Su- 
preme Court  of  that  state  give  to  its  house  of  representatives  their  opin- 
ions, that  it  is  -contrary  to  the  Maine  constitution  for  towns  to  assist 
manufactures,  or  to  carry  on  manufactures  themselves.  Among  the 
opinions  is  one  by  Chief  Justice  Appleton,  giving  the  prototype  of  Cooley's 
definition,  and  which  he  would  have  done  better  to  follow  literally : 
"Taxes  are  the  enforced  proportional  contribution  of  each  citizen  and 
of  his  estate,  levied  by  the  authority  of  the  state  for  the  support  of  the 
government  and  for  all  public  needs." 

*Not  if  he  should  go  to  the  Century  definition  of  "at,"  which  would 
tell  him  under  the  3d  numbered  paragraph  of  this  little  word's  defini- 
tidn,  that  at  "of  relative  position"  implies  "a  point  in  an  actual  or  pos- 
sible series,  and  hence  used  of  degree,  price,  time"  [et  al.]  ;  as,  : 
at  seventy  degrees  in  the  shade,  at  four  dollars  a  yard,  at  ten  cents  a 
pound,  *  *  *  at  midnight,  at  first,  :  *  *  etc.  No  more  if  he 
should  consult  its  definition  of  "discount,"  verb  transitive,  paragraph  3: 
"In  finance,  to  purchase,  or  pay  the  amount  of  in  cash,  less  a  certain  rate 
per  cent.  *  *  *  *  ;  as,  to  discount  a  bill  or  a  claim  at  7  per  cent." 
No  more,  if  he  should  try  definition  of  discount  in  paragraph  4:  To 
make  a  deduction  from,  put  a  reduced  estimate  or  valuation  upon;  make 


HERTIG    ON     TAXATION.  •  55 

thirty  lines  following  it, — rest  upon  definition  and  commentary 
as  an  all-sufficient  basis  for  a  system  of  taxation  which  he 
would  now  frame  him  for  beguilement  of  his  solitude  and  for 
the  coming  "economic  man"  who  should  some  time,  in  multi- 
plied editions,  people  his  road-girt  home.  But,  if  somewhat  of 
an  analytic  questioner,  he  might  bethink  him  that  the  tax  so 
defined  is  only  a  paid  tax,  and  wonder  what  he  should  call  those 
amounts  which,  it  might  occur  to  him,  could  be  levied,  and  yet 
possibly  remain  forever  uncollected  and  unenforced — a  matter 
on  which  the  big  dictionary  would  shed  no  light,  but  which 
would  come  out  affirmatively  and  indicatively  strong,  could  he 
only  by  some  wireless  telegraphy  get  and  understand  signals 
from  State  Auditor  Dunn,  of  Minnesota.  He  might  learn  from 
the  dictionary  that  a  corporation  is  an  "artificial  person";  he 
could  not  learn  from  it  whether  or  not  a  corporation  in  the  eye 
of  the  taxing  power  is  a  "person,"  or  "property"  or  "income," 
or  sometimes  one  or  more  of  these  things  and  sometimes  none 
of  them.  He  might  admire  the  spirit  of  precision  displayed  in 
the  use  of  its,  before  "public  or  governmental  needs,"  should 
he  think  the  word  meant  to  mark  off  the  needs  of  the  govern- 
ment as  distinguished  from  needs  of  another  government;  and 
his  admiration  might  take  another  direction,  if  he  should  con- 


an  allowance  for  exaggeration  or  excess  in :  as,  to  discount  a  braggart's 
story;  to  discount  an  improbable  piece  of  news." 

As  I  write  this  note,  July  I4th,  1902,  in  the  library  of  the  University 
of  Minnesota,  comes  up  a  young  woman  seeking  information  about 
place  of  registry  for  the  summer  school.  Not  being  quite  sure  on  this 
point,  I  suggest  to  her  to  wait  until  some  one  in  touch  with  the  genii 
of  the  place  shall  appear ;  and  then  with  the  preamble,  "One  question 
deserves  another,"  I  ask  her,  "Will  you  tell  me  what  you  understand  by 
this  statement, — 'The  paper  ruble  is  discounted  at  about  50  cents?'" 
She:  "Please  repeat  the  statement."  I  repeat.  She:  "I  suppose  it 
means  50  per  cent  is  taken  off."  I:  "Off  the  nominal  value?"  She: 
"Yes."  Further  question  elicits  fact  that  she  has  taught  39  months  in 
grammar  grades.  A  demure  and  mature  girl,  who  had  shown  me  where 
they  keep  the  Century  Dictionary,  now  appears,  and  my  enlightener  of 
39  months'  experience  is  enlightened  in  turn,  and  duly  goes  to. register. 
I  ask  and  receive  permission  of  the  demure  and  mature  girl  to  ask  her 
a  question. — "What  do  you  understand  this  to  mean  ?"  repeating  the 
paper-ruble  statement.  She,  too,  asks  that  statement  be  repeated.  I  re- 
peat. She  then  discriminates  between  50  per  cent  and  "50  cents,"  and 
concludes  that  "at  about  50  cents"  means  that  50  cents  is  taken  off 
each  ruble  by  him  who  discounts.  I  neglect  to  inquire  about  her  experi- 
ence. I  next  ask  a  young  man  who  has  taught  five  years,  and  is  now 
about  to  take  a  summer  school  course  in  bookkeeping  and  history,  what 
he  understands  by  the  statement.  I  repeat  it  for  him,  once  and  again.  After 
much  hesitation  he  thinks  it  means  "a.  paper  ruble  is  worth  about  50 
cents  in  American  money." — These  pieces  justificatives  may  not  be  quite 
in  the  Gilder-gangish  tone  of  lexicography;  but  they  are  not  even  a  little 
"scratched,"  and  they  will  certainly  "serve." 


56  -  HERTIG     ON     TAXATION. 

strtte  its  to  be  merely  in  aid  of  "public"  and  "governmental"  as 
plainly  implying  the  possession  by  government  of  private  and 
non-governmental  needs.  He  might  wonder  whether  taxes,  to 
be  such,  must  be  coextensive  with  all  "public  or  governmental 
needs,"  and  whether,  if  not  sufficient  to  go  round,  or  if  some 
public  need  has  been  forgotten  entirely,  they  are  none  the  less 
taxes.  He  might  even  think  that  by  using  the  word  all,  the 
framer  of  the  definition  had  in  mind  a  magnificent  paternalism, 
and  so  would  frame  accordingly  his  system  for  the  coming 
economic  man.  Not  being  told  by  the  definition  that  "local 
authority"  is  a  derived  authority  whose  source  is  the  state,  he 
might  go  too  far  in  giving  his  towns  and  counties  autonomy. 
If  to  such  criticism  it  is  replied  that  he  would  know  without 
the  express  telling  of  it  that  "local  authority"  is  derived  from 
the  state,  is  amended,  altered  or  suspended  at  the  state's  pleas- 
ure, the  counter-reply  is  that  he  would  be  much  less  likely  to 
know  this,  in  its  many  shades,  very  nice  legal  proposition  than 
to  know  the  very  coarse  fact,  which  could  hardly  have  escaped 
his  notice,  that  counties,  towns,  cities,  districts  and  the  like  do 
levy  local  taxes.  Taxes  to  be  such  must  be  levied  by  sufficient 
authority :  either  rest  upon  such  words  when  you  define,  or  if 
you  essay  to  list  the  different  kinds  of  authority  for  levying 
them,  do  not  model  yourself  upon  the  Century  Dictionary. 
Among  the  things  which  the  man  on  the  island  might  be  de- 
luded into  believing  is  the  following  gem  from  the  Century's 
fine-print  commentary  on  its  tax  definition :  "In  the  United 
States  all  state  and  municipal  taxes  are  direct  and  are  levied 
upon  the  assessed  values  of  real  and  personal  property,  while 
the  revenue  required  for  general  governmental  purposes  [mean- 
ing required  by  the  federal  government]  is  derived  from  indirect 
taxes  upon  certain  imports,  and  upon  whisky,  tobacco,  etc." 
Perhaps  this  statement  is  sufficient  for  slipshod  purposes,  and 
averages  well  up  to  the  standards  of  slipshod  correctness.  The 
government  at  Washington  has  often  taxed  occupations,  and 
still  does  so  to  some  extent.  Are  those  cases  covered  by  "etc." 
in  connection  with  whisky  and  tobacco?  Could  the  man  on  the 
island  ferret  out  the  federal  tax  on  national  bank  notes  under 
such  description?  Could  he  remotely  guess  under  it  at  the  num- 
ber and  variety  of  the  federal  taxes  imposed  in,  for,  and  after 
the  Civil  War?  Or  by  the  Spanish- War  revenue  act  of  1898? 
"All  state  and  municipal  taxes  *  *  *  direct,  and  * 
levied  upon  the  assessed  values  of  real  and  personal  property"? 
It  would  be  difficult  to  find  a  more  grossly  inaccurate  state- 
ment even  in  the  Century  Dictionary.  It  excludes  taxes  on 
gross  earnings,  taxes  on  net  earnings,  taxes  on  insurance  pre- 


HERTIG     ON     TAXATION.  57 

miums,  taxes  on  the  nominal  or  authorized  capital  of  new  cor- 
porations for  the  privilege  of  incorporating,  fixed  annual  taxes 
on  the  apparent  or  nominal  capital  of  corporations  (such  as 
yielded  the  state  of  New  Jersey — taxes  on  railroad  and  canal 
companies  not  reckoned — the  sum  of  $1,633,074.19  for  the  year 
ending  October  31,  1901),  license  and  other  occupation  taxes  so 
prominent  in  the  finances  of  Southern  states  and  their  subdivi- 
sions, license  and  other  like  taxes  yielding  considerable  revenue 
in  most  of  the  states  and  enormous  sums  in  Pennsylvania,  as 
will  be  shown  in  the  table  of  itemized  receipts  for  that  state  in 
a  subsequent  chapter.  The  Century  limitation  of  state  and 
municipal  taxes  excludes  in  fact  all  but  the  general  property 
taxes. 

I  cheerfully  give  to  the  Cooley  and  to  the  Century  definition 
the  benefit  of  the  unintentional  brief  which  David  A.  Wells  holds 
for  them  regarding  the  meaning  of  "proportional."  This  "term," 
says  he,  "*  *  *  which  is  largely  used  in  constitutional  pro- 
visions and  in  statutes  relating  to  taxation,  has,  however,  a 
meaning  so  much  broader  and  of  such  greater  significance  than 
generally  attributed  to  it  by  law-makers  and  even  law  inter- 
preters, that  it  is  worth  while  to  institute  an  inquiry  and  en- 
deavor to  understand  clearly  what  it  does  mean.  Scientifically 
considered,  it  means  the  making  of  the  burden  of  taxation  equal 
upon  all  subjects  of  immediate  competition.  This  principle  is 
one  of  the  prime  essentials  of  taxation,  and  when  it  is  violated, 
the  act  of  taking  or  the  enforced  contribution,  is  not  entitled  to 
be  considered  taxation,  but  becomes  at  once  an  arbitrary  spolia- 
tion or  confiscation." — Theory  and  Practice  of  Taxation,  320-1. 
*  *  *  * 

"It  would  seem  to  be  clear,  therefore,  that  a  tax  that  is 
not  levied  proportionally,  or,  what  is  the  same  thing,  equally 
and  uniformly  upon  all  subjects  in  the  same  field  of  competi- 
tion— as,  for  example,  upon  all  persons  engaged  in  the  same 
business  or  profession,  or  upon  all  property  of  the  same  kind 
and  all  profit  or  income  (less  exemptions  in  the  nature  of  chari- 
ties) in  the  same  ratio — is  a  discriminating  exaction,  without 
claim  tc  either  justice  or  equality,  inasmuch  as  to  the  same- 
extent  that  some  are  favored  by  the  discrimination,  others  are 
inevitably  plundered  or  crushed. "— 7rf.  322. 

The  above  passages  from  Wells  may  be  taken  as  typical  of 
the  absurd  lengths  to  which  an  otherwise  reasonable  man  may 
go  in  defense  of  economic  or  other  slogan  to  which  he  has  com- 
mitted his  ultimate  principles  or  his  partisan  hopes.  Wells 
was  a  doctrinaire  of  individualism,  a  partisan  of  the  view  that 
the  state  and  the  nation  should  keep  hands  off,  let  things  alone. 


58  HERTIG    ON    TAXATION. 

That  is  to  say,  he  was  as  much  an  individualist  as  one  may  be, 
and  be  an  American,  in  these  days  of  paternalistic  tendencies. 
He  waged  war  on  our  protective  tariffs,  and  held  them. largely 
responsible  for  the  growth  of  the  paternalistic  tendencies  which 
he  viewed  with  disgust  if  not  with  alarm.  Myself  I  confess 
frankly  to  looking  with  favor  on  paternal  government,  because 
the  people  want  it,  and,  they  wanting  it,  some  form  of  it  is  inevit- 
able. I  am  chiefly  concerned  with  elaborating  and  championing 
a  paternalism  of  the  right  sort — with  making  it  compatible  with 
private  thrift,  public  economy,  improved  liberty,  with  ideals  of 
justice  at  once  noble  and  practical,  to  serve  it  with  a  New  Juris- 
prudence and  a  new  Civil  Nation.  The  choice  for  individualists 
of  the  Wells  or  any  type  lies,  I  take  it,  only  between  the  pater- 
nalism I  favor  and  some  other  which  I  am  quite  sure  they  would 
like  less.  See  how  the  doctrinaire  in  Wells  boggles  and  shuf- 
fles to  inject  into  "proportional"  a  meaning  that  for  it  "never 
was  on  sea  or  land."  It  has,  forsooth,  because  Wells  for  his 
doctrinaire  needs  must  find  it  so,  "a  meaning  so  much  broader 
and  of  such  greater  significance  than  generally  attributed  to  it 
by  law-makers  and  even  law-interpreters"!  How  vainly  and 
with  what  untrue  aim  law-interpreter  Cooley,  how  servilely 
and  with  what  weak  fiat  the  Century  Dictionary  by  "convey- 
ance" from  him — seek  to  attach  some  jack-leg  meaning  of  "pro- 
portional" to  their  definitions  of  taxes  we  have  already  seen. 
We  have  seen,  too,  from  the  Connecticut  case,  the  Massachu- 
setts case,  the  Missouri  case  above  cited  (all  cited  by  Cooley. 
too),  certain  typical  limitations  and  negations  affixed  to  the 
proportionality  of  taxes  by  American  jurisprudence.  It  would 
be  easy  to  point  out  a  long  line  of  other  decisions  by  American 
courts,  many  of  them  cited  by  Cooley,  in  which  the  dispropor- 
tionate levy  of  actual  taxes  x  is  conceded,  but  individual  taxes 
or  tax  levies  sought  on  that  ground  to  be  impeached  are  sus- 
tained, for  the  practical,  but  not  often  confessed,  reason  that,  if 
not  so  sustained,  the  state  would  be  financially  embarrassed 
and  judges'  salaries  might  stop.  He  would  be  a  rash  man, 
knowing  the  limitations  of  judges,  who  should  say  that  no 
American  judge  ever  held  a  uniform  tax  "upon  all  persons 
engaged  in  the  same  business  or  profession"  to  mean  and  afford 
pat  illustration  of  a  "proportional"  tax;  he  would  have  slight 
knowledge  indeed  of  American  jurisprudence  who  should  be 
unaware"  of  the  fact  that  practically  every  American  judge  has 
been  obliged  to  invent  his  own,  or  meekly  adopt  some  other 
judge's,  most  transparent  sophism,  in  order  to  uphoM  taxes  as 
"proportional,"  or  what  is  still  more  important,  and,  despite  the 
dictum  of  Wells,  what  is  by  no  means  the  same  thing,  to  up- 


HERTIG    ON    TAXATION.  59 

hold  them  as  "equal"  or  "uniform"  within  the  meaning  of  that 
equality  and  uniformity  prescribed  in  constitutions.  The  final 
trump  which  some  judges  play  when  the  tax  sought  to  be 
impeached  obstinately  refuses  to  hold,  or  answer  to,  the  sophis- 
ticated label  of  "equal"  or  "uniform,"  is  to  call  it  by  some  other 
name  than  tax,  and  then  decide  that,  as  it  is  not  jn  fact  a  tax.  it 
therefore  does  not  need  to  be  "uniform."*  How  lightly  and 
loosely  the  Fourteenth  Amendment  to  the  Constitution  with  its 
"no  state  shall  *  *  *  deny  to  any  person  within  its  juris- 
diction the  equal  protection  of  the  laws"  sets  upon  the  taxing 
powers  of  American  states  will  abundantly  appear  in  a  subse- 
quent chapter.  Many  a  tax,  it  is  true,  has  been  held  to  be  in 
whole  or  in  part  unconstitutional  as  violating  either  the  federal 
or  some  state  constitution;  but  the  stubborn  and  enduring  fact 
remains  that,  except  within  relatively  insignificant  limits,  Amer- 
ican jurisprudence  has  abandoned  equality  and  uniformity  as 
the  working  basis  of  taxation,  therein  and  thereby  demonstrat- 
ing to  whoever  makes  earnest  study  of  the  records  that  Amer- 
ican statesmanship  has  never  borne  serious  allegiance  to  equal- 
ity and  uniformity  of  taxation,  in  anything  nearly  covering  the 
whole  field,  in  any  sense  approximating  the  popular  meaning  of 
taxation. 

Concede,  as  federal  jurisprudence  does,  that  any  American 

*Thus,  under  the  elastic  cover  of  the  "police  power,"  states  are  held 
to  possess  an  inherent  right  to  regulate  those  matters  which  pertain  in 
undefined  respects  to  the  health,  comfort  and  general  well-being  of 
society;  and,  as  incident  to  police  regulations,  the  state  or  municipality 
may  impose  fees  and  taxes  which  are  not  taxes  within  the  judge-given 
meaning  of  the  revenue  sections  in  their  constitutions,  and  which  therefore 
need  not  be,  since  they  are  not,  equal  and  uniform.  And  there  are  cases 
going  much  further  in  holding  that  a  tax  is  not  a  tax  than  is  indicated 
in  the  proposition  just  stated.  As  Prof.  Seligman  says,  "It  may  be  con- 
fidently stated  that  from  the  standpoint  of  the  science  of  finance,  the 
distinction  drawn  between  the  police  power  and  the  taxing  power  is 
to  a  great  extent  a  fiction  referable  to  certain  difficulties  in  American 
constitutional  law,  and  to  a  lack  of  economic  analysis  on  the  part  of 
the  judges. — Essays  in  Taxation  (New  York,  1895),  269.  Compare  p. 
83,  below)  sarcastic  description  of  the  police  power  by  Judge  McGee 
and  Justice  Brewer.  The  contradictions  between  the  courts  of  differ- 
ent states  as  to  what  tax  and  no-tax  are  to  be  referred  respectively  to 
the  taxing  and  to  the  police  powers  are  almost  amusing.  In  virtuous 
Michigan,  they  once  had  a  constitution  that  roundly  forbade  the  licens- 
ing of  dram  shops,  but  Was  entirely  silent  as  to  taxing  them.  The  con- 
stitution had  deliberately  shut  off  a  part  of  the  sovereign  police  power, 
and  blind  pigs  flourished  scot  free.  Should  virtue  continue  abased  and 
logic  exalted?  Not  unless  Puritan  descent  counts  for  naught.  A  vir- 
tuous legislature  taxed  and  called  it  taxing;  a  virtuous  supreme  court 
held  that  it  could  validly  do  so  under  the  taxing  power;  that  the  legis- 
lature could  lawfully  make  the  dramshops  put  up, — and  the  police  power 
still  lawfully  make  them  shut  up. — Youngblood  v.  Sexton,  32  Mich.  406. 


60  HERTIG     ON     TAXATION. 

state,  in  so  far  as  not  prohibited  by  that  state's  constitution, 
may  create  practically  as  many  classes  of  persons  and  proper- 
ties for  taxing  purposes  as  to  the  state  legislature  shall  seem 
fit;  concede,  as  federal  jurisprudence  does,  that  such  state 
through  its  legislature  may  impose  upon  such  persons  and  prop- 
erties such  different  and  vary  in  <?  taxes  as  to  the  legislature 
shall  seem  fit,  provided  only  that  the  taxes  imposed  be  'uni- 
form" on  the  particular  class  of  persons,  on  the  particular  kind 
of  property,  they  seek  to  reach*;  concede,  as  federal  jurispru- 
dence does,  that  the  foregoing  concessions  in  no  wise  contra- 
vene the  Constitution  of  the  United  States;  concede,  as  all 
American  jurisprudence  does,  that  unformity  nowhere  means 
more  than  geographical  uniformity,  and  (except  locally  and 
yieldingly)  class  uniformity;  concede,  as  all  American  jurispru- 
dence does,  that  Chief  Justice  Marshall  uttered  sound  doctrine 
when  he  said  (McCnllo-ch  v.  Maryland,  4  Wheat.  316),  "If  the 
right  to  impose  a  tax  exists,  it  is  a  right  which,  in  its  nature, 
acknowledges  no  limits";  concede  further  that  no  substantial 
limitation  of  Marshall's  doctrine  is  attempted  by  the  supreme 
jcourt  of  the  United  States  in  the  later  case  of  Loan  Associa- 
tion v.  Topeka,  20  Wall.  663,  where  Justice  Miller  said,  "Given 
a  purpose  or  object  for  which  taxation  may  be  lawfully  used, 
and  the  extent  of  its  exercise  is  in  its  very  nature  unlimited"; 
concede  also,  as  a  matter  of  logical  necessity,  that  no  practical 
limitation  of  the  taxing  power  can  be  made  effective  by  courts, 
so  long  as  they  hold  with  the  United  States  Supreme  Court 
"that  the  judicial  power  cannot  inquire  into  the  intentions  of 
congress  in  imposing  a  tax,  and  that,  if  injustice  is  done,  the 
only  remedy  is  an  appeal  to  the  legislative  power  that  has  in- 
flicted it";  concede,  too,  that  where  present  constitutions  are 
silent,  as  most  of  them  are  in  fact,  on  the  subject  of  inheritance 
and  succession  taxes,  estates  are  in  no  wise  protected  by  consti- 
tutional or  other  provisions  relating  to  the  exercise  of  the  tax- 
ing power,  but  may  be  cut  as  deep  as  the  legislature  will,  even 
though  estates  consist  of  bonds  or  legal  tender  notes  not  other- 
wise taxable;  concede,  I  repeat,  as  above  set  forth, — and  the 
further  concession  must  be  made  that,  often  as  courts  are  men- 
tioned as  the  bulwark  of  privilege,  true  as  it  often,  and  indeed 
generally,  is  that  they  are  so,  it  is  none  the  less  true  that  so 


*This  concession  is  much  strengthened  by  the  further  one,  repeatedly 
made  by  the  supreme  court  of  the  United  States,  "that  the  inhibition 
against  taking  private  property  for  public  purposes,  without  compensation, 
contained  in  the  Constitution  of  the  United  States,  does  not  extend  to 
state  legislation,  but  is  restricted  to  the  legislation  of  congress." — Opinions 
of  Justices,  58  Maine,  604-5. 


HERTIG    ON    TAXATION.  61 

far  as  any  legal  obstacle,  or  doctrinal  protection  of  American 
jurisprudence  is  concerned,  the  glittering  bait  of  the  entire 
wealth  of  the  United  States  and  of  the  several  states,  is  sus- 
pended in  easy  reach  of  the  people  through  their  taxing  powers, 
—suspended,  that  is,  with  one  tolerably  important  exception, 
namely,  such  property  as  may  be  protected  in  whole  or  in  part 
against  taxation  by  the  doctrine  of  the  United  States  Supreme 
Court  put  forth  in  the  ancient  and  celebrated  case  of  Dart- 
mouth College  v.  Woodward  (4  Wheat.  518),  wherein  the  in- 
hibition of  the  federal  Constitution  on  the  states  against  im- 
pairing 'the  obligation  of  contracts"  was  given  a  construction 
which  enabled  the  late  tax  commission  of  Minnesota  to  saj 
truthfully  (Report,  p.  53)  that  the  court  "has  never  rendered  a 
more  unpopular  decision  than  when  it  held  that  a  state  legis- 
lature may,  unless  restricted  by  a  constitution,  contract  away 
the  sovereign  power  of  taxation."  But  many  a  limitation  has 
already  been  engrafted  on  the  Dartmouth-College  case,  and 
though,  speaking  from  the  standpoint  of  routine  law  and  the 
custom  of  the  supreme  court,  it  is  not  probable  that  that  case 
will  be  formally  overruled,  there  is  an  abundance  of  positive 
artillery  in  the  legal  arsenal  to  overcome  its  negative  resistance, 
whenever  the  people  shall  see  fit  to  make  a  serious  matter  of  the 
same. 

I  doubt  not  the  foregoing  paragraph  will  seem  to  many 
American  readers  as  novel  in  its  conclusions  of  law  and  fact, 
as  it  undoubtedly  will,  should  he  read  it,  to  W.  E.  H.  Lecky, 
widely  known  in  this  country  as  the  author  of  Rationalism  in 
Europe,  and  to  a  less  extent  by  other  works.  In  his  pessimistic 
book,  Democracy  and  Liberty,  (two  vols.,  New  York,  1896), 
Lecky  sees  that  "serious  clouds  seem  to  hang  on  their  [our] 
horizon"  as  on  democratic  horizons  everywhere.  He  is  alarmed 
over  corruption  in  our  politics  and  that  acquiescence  therein 
''which  is  worse  than  corruption."  In  his  opinion,  we  should 
hot  have  so  acquiesced,  under  penalty  of  long  ago  shooting 
Niagara,  "if  it  were  not  that  our  admirable  written  Constitution 
[the  federal],  enforced  by  a  powerful  and  vigilant  Supreme 
Court,  had  restricted  to  small  limits  the  possibilities  of  mis- 
government.  All  the  rights  that  men  value  the  most  are  placed 
beyond  the  reach  of  a  tyrannical  majority.  *  *  *  No  per- 
son can  be  deprived  of  life,  liberty,  or  property  without  due 
process  of  law.  All  the  main  articles  of  what  British  statesmen 
would  regard  as  necessary  liberties  are  guaranteed,  and  prop- 
erty is  so  fenced  round  by  constitutional  provisions  that  con- 
fiscatory  legislation  becomes  almost  impossible.  No  private 
property  can  be  taken  for  public  use  without  just  compensation, 


62  HERTIG    ON    TAXATION. 

and  the  federal  Constitution  contains  an  invaluable  provision 
forbidding  any  State  to  pass  any  law  impairing  the  obligation  of 
contracts.  The  danger  of  partial  or  highly  graduated  taxation 
voted  by  the  many  and  falling  on  the  few  has  been,  in  a  great 
measure,  guarded  against."  **'*!,  116-17.  And  the 
above  quotation  shows  why  Lecky  will  find  my  conclusions 
novel. 

There  is  no  doubt  that  any  sudden  and  radical  departure 
from  present  practice  in  taxation  and  looking  toward  quick 
realization  of  its  foregoing  mentioned  possibilities,  would  call 
out  tremendous  resistance  on  the  part  of  interests  adversely 
affected;  no  doubt  such  resistance  would  take  on  novel  and 
surprising  forms;  no  doubt,  too,  that  many  courts  would  sound 
a  piteous  note  of  surprise,  and  hedge  against  results  with  nimble 
inconsistency,  if  the  people  should  quickly  and  seriously  take 
their  present  word  on  taxation  to  the  full  extent  of  its  letter 
and  of  its  manifest  implications.  That,  however,  is  'not  my 
concern:  I  take  taxation  as  I  find  it  in  official  practice,  in  judi- 
cial sanction,  in  the  "promise  and  potentiality"  of  what  it  may 
bring  forth,  in  what,  taking  its  facts  and  possibilities  as  so  found, 
I  conceive  it  ought  to,  and  must,  bring  forth,  or  to  put  it  philo- 
sophically, what  it  will  bring  forth.  It  is  for  others  to  hedge 
and  palter,  if  I  have  made  visible  the  hitherto  "unseen  liga- 
ment" which  was  pressing  them  to  consequences  they -could 
not  foresee,  and  which  consequences  I  make  bold  to  assert  they 
cannot  now  avoid.  I  do  not  like  a  parasitic  paternalism — we 
already  have  it:  I  do  like,  as  submissive  to,  and  interpreter  of, 
the  spirit  of  my  time,  an  individualized  and  enlightened  pater- 
nalism— we  need  for  it  the  New  Jurisprudence  and  the  Civil 
Nation,  which  are  to  each  other  as  authoritative  voice  and  ful- 
filling organism. 


CHAPTER  V. 


Conception  of  legal  liberty  constantly  changing — Genuine  individualism 
holds  it  wrong  to  tax  A  for  educating  B's  children — Auberon  Herbert 
on  state-given  education  quoted  to  show  how  far  we  are  from  real 
individualism — Strict  individualism,  as  a  dream,  less  subject  to  jar- 
ring collision  with  fact  than  the  spurious  individualism  of  Wells  and 
others — Huxley  justly  concludes  that  individualism  logically  ends  in 
theoretical  anarchism — Neither  the  genuine  nor  the  spurious  individual- 
ism has  any  standing  in  the  field  of  taxation — Legislatures  and  judges 
alike  drifting  toward  extension  of  state  control — Madison's  veto  and 
our  building  an  isthmian  canal  as  polar  opposites — Break-down  of  in- 
dividualism in  tax  propositions  of  its  choice — Judge  Cooley's  lamentable 
fall  from  the  Wells  standpoint. 


Now,  the  conception  of  legal  liberty,  of  that  liberty  which 
the  public  should  permit  the  individual  to  enjoy  with  respect 
to  his  person  and  his  property,  is  constantly  changing,  is  now, 
taking  the  modern  world  by  and  large,  so  discordant,  so  varied 
and  contradictory  that,  described  in  a  general  sense,  such  con- 
ception may  be  said  to  reflect  mental  and  emotional  anarchy — 
prevalent  enough  in  the  modern  world  not  only  as  to  this,  but 
also  as  to  some  other  important  conceptions.  Strict  individ- 
ualism is  limited  to  a  handful  of  doctrinaires  here  and  in  Europe ; 
in  neither  country  has  it  in  average  sentiment  or  in  the  statute 
book  any  effective  support.  How  far  average  American  senti- 
ment is  from  strict  individualism,  may  be  easily  and  strikingly 
shown  by  giving  echo  to  the  voice  of  one  crying  in  the  wilder- 
ness, and  letting  it  mark  its  own  contrast  with  the  average 
voice  and  the  average  present  condition.  Mr.  Auberon  Herbert 
is  a  very  intelligent  and  well-meaning  Englishman,  a  clever 
writer,  and,  except  when  his  voice  is  grossly  out  of  tune  with 
the  times,  a  man  to  be  heard  with  earnest  attention.  I  have 
seen  no  other  article  on  the  Boer  war  from  English  or  other 
sources  quite  so  impartial  and  judicial  as  one  from  his  pen. 
Herbert  is^  moreover,  an  extreme  individualist,  and  does  not 
believe  in  enforced  contributions,  "proportional"  or  otherwise. 


04  HERTIG    ON    TAXATION. 

but  in  so  far  as  he  believes  in  a  state,  believes  in  one  supported 
by  voluntary  contributions.  Now  it  is  his  voice  that  I  have 
chosen  to  accent  the  contrast  between  the  real  thing  in  individ- 
ualism and  the  make-believe  individualism  of  poor  old  dry-as- 
dust  Cooley,  of  Wells,  of  preacher,  professor,  politician,  and 
average  citizen.  Listen  to  Herbert  on  and  against  state-given 
education: 

"The  greatest  of  all  reasons  [against  it  is  that]  you  must 
not  take  money  from  A  to  pay  for  B,  [which  reason]  is  the 
foundation  of  all  just  dealing  between  man  and  man."  We  are 
so  accustomed  to  the  fact  that  the  bachelor,  the  spinster  and 
other  childless  persons  pay  school  taxes  without  discrimination 
or  abatement,  that  their  doing  so  seems  almost  as  natural  and 
as  little  in  need  of  justification  as  their  payments  to  butcher 
and  baker  on  individual  account.  The  effective  majority,  re- 
joicing in  its  power  to  exact  and  believing  in  the  utility  of  the 
exaction,  has  no  ears  to  listen  to  any  question  of  abstract  right 
that  may  underlie  such  enforced  contribution.  "If,"  as  J.  B. 
Proudhon  pointed  out,  "property  is  of  natural  right,  as  the 
Declaration  of  1793  says,  all  I  have  by  virtue  of  that  right  is 
as  sacred  as  my  person;  it  is  my  blood,  my  life,  my  own  self: 
whoever  touches  it  offends  the  apple  of  my  eye.  My  100,000 
francs  of  income  are  as  inviolable  as  the  grisette's  daily  wage 
of  three-quarters  of  a  franc;  my  luxurious  apartments  as  much 
so  as  her  stuffy  room  in  the  garret."  Modern  necessities,  real 
or  fancied,  of  taxation  make  short  work  of  natural  and  other 
individual  rights,  as  Wells  plaintively  admits  in  telling  that 
taxation  in  Massachusetts  "administered  by  phenomenally  hon- 
est and  competent  men"  has  educed  the  grave  assertion  by 
"the  acknowledged  representative"  of  her  system,  as  worked  in 
Boston,  that  "the  individual  person  has  no  inalienable  rights 
except  that  to  his  own  righteousness!"  Listen  now  further  to 
Herbert  on  state-given  education: 

"Real  intelligence  will  come  to  a  nation  by  the  process  of 
educating  itself,  not  by  being  educated  by  an  external  machin- 
ery set  up  by  an  enterprising  *  *  *  [government].  It  is 
the  process  of  carrying  out  education  by  every  sort 'of  volun- 
tary association,  under  every  kind  of  difficulty,  and  at  the  cost 
of  many  sacrifices  that  really  teaches  and  influences  the  people 
of  a  country.  Your  state  pot  of  educational  whitewash  with 
which  all  the  children  of  the  country  are  daubed,  whilst  you 
contract  to  pay  so  much  per  thousand  for  the  daubing,  will 
never  do  more  than  touch  the  outside  of  the  nation,  morally  or 
even  intellectually.  A  state  system  of  education  must  be,  by 
the  necesity  of  things,  showy,  superficial,  and  vulgar,  without 


HERTIG    ON    TAXATION.  65 

soul  or  truth  in  it.  The  American  people,  like  *  *  *  [the 
English],  will  never  rise  to  their  true  proportions  as  long  as 
they  are  cursed  by  it.  It  is  in  reality  a  gigantic  enforced  char- 
ity that  is  without  any  of  the  healing  virtues  of  charity,  and  is 
always  pretentiously  denying  the  vices  of  its  origin.  The  real 
living  and  quickening  effects  of  education  can  only  exist  as  the 
parents  in  every  village  undertake  the  thing  with  their  own 
hands  and  with  their  own  resources.  Then  education,  however 
deficient  in  the  outside  grandeur  of  a  political  system,  will  be- 
come a  real  thing,  a  flame  touching  the  hearts  of  the  children 
just  because  it  touches  the  hearts  of  the  parents.  There  is"  a 
great  sympathy  in  these  matters.  But  as  things  are,  how  can 
it  be  a  real  thing  now  that  the  politicians  have  got  hold  of  it; 
that  the  rich  pay  for  it;  that  the  Dissenters  have  made  it  tneir 
established  church;  that  a  conceited  central  office  undertakes 
to  think  for  a  whole  nation?  *  *  *  The  whole  thing  is  a 
standing  disgrace  to  our  intelligence  as  a  nation;  the  biggest 
example  perhaps  of  that  hocus-pocus  which  our  people  allow 
themselves  to  accept  because  it  comes  to  them  with  an  unworthy 
bribe  of  money." — A  Politician  in  Trouble  About  his  Soul 
(London,  1884),  pp.  206-7. 

Said  I  not  the  voice  of  one  crying  in  the  wilderness?  Yet 
Herbert  has  admirers  who  believe  him  to  be  a  statesman,  but 
handicapped  by  living  some  centuries  in  advance  of  the  world. 
I  quote  him  merely  for  a  case  of  individualism  in  such  extreme 
opposition  to  current  practice  and  sentiment  as  to  need  no  argu- 
ment to  show  that  it  has  no  leg  to  stand  upon  in  our  times,  if 
ever;  quote  him  to  show  the  honest  feeling  of  real  individual- 
ism when  brought  face  to  face  with  that  piece  of  genuine  pater- 
nalism, the  public-school  system,  dear  to  our  hearts;  quote  him 
to  emphasize  my  conviction  and  proof  that  the  mixed  and 
make-believe  individualism  of  Cooley,  Wells  and  others,  while 
nearer  to  us  as  reflecting  our  transition  and  anarchic  stage,  is 
no  more  possible  as  our  permanent  port  and  anchorage  tha-n 
Herbert's  sturdy  and  thorough-paced  individualism.  Indeed 
Herbert,  clinging  to  an  almost  indefinitely  remote,  if  riot  wholly 
impractical  civil  polity,  has  firmer  anchorage  than  Wells  or  any 
of  the  quasi-individualists  of  to-day:  the  fixed  and  far-off 
dream-ship  of  extreme  individualism  rides  safe  from  the  shock 
of  jarring  fact;  the  leaky  craft  that  carries  the  hopes  and  for- 
tunes of  current  individualism  is  not  without  sound  timbers, 
but  is  daily  subject  to  further  stress  and  to  a  leakage  not  to  be 
caulked  against  with  dreams  and  lying  definitions, — a  leakage 
which  shall  not  stop  short  of  complete  water-logging,  and  the 
bringing  aboard  of  a  new  crew  to  make  partial  salvage — worse, 


66  HERTIG    ON     TAXATION. 

perhaps,  in  the  eyes  of  owners  and  present  crew,  than  going 
clean  to  the  bottom. 

It  was  well  observed  by  Huxley,  in  his  Essay  on  Govern- 
ment, that  "individualism,  pushed  to  its  logical  extreme,  must 
end  in  philosophical  anarchy," — the  theoretical  anarchism,  which, 
with  keen  eyes  for  the  imperfections  of  government  and  no  eyes 
for  the  permanent  limitations  of  human  nature,  makes  its  re- 
ligion out  of  an  assumed  perfectibility  of  human  nature,  and 
sets  up  an  ideal  of  earthly  human  society  without  government, 
— an  ideal  gravely  asserted,  in  the  Qth  edition  of  the  Encyclo- 
pedia Britanica,  to  be  one  "to  which  the  highest  religion  and 
philosophy  looks  forward  as  the  goal  of  man!"  Very  sober 
and  very  authoritative  thinkers  have  had  at  least  to  sigh  over 
the  necessity  of  government.  James  Wilson,  one  of  the  fathers 
of  the  Constitution,  and  who  became  a  justice  of  the  Supreme 
Court  of  the  United  States,  said,  '"Government  is,  indeed,  highh 
necessary;  but  it  is  highly  necessary  to  a  fallen  state."  And 
that  justly  celebrated  collection  of  essays  by  Hamilton,  Mad- 
ison and  Jay,  called  The-  Federalist,  written  arid  published,  we 
may  say,  as  campaign  documents  to  aid  in  ttie  ratification  of  the 
Constitution,  asks,  "But  what  is  government  itself  but  the  great- 
est of  all  reflections  on  human  nature  ?":;: 

Now  extreme  individualism,  consistent,  perhaps,  in  logic, 
impossible  of  realization,  dovetails,  as  it  were,  with  half-way, 
or  quasi,  individualism,  which  may  be  described  as  inconsistent 
in  logic,  possible  in  realization:  the  latter  exists  in  opinion  and 
has  corresponding  embodiment  in  civil  society.  We  have 
seen  the  untenable  case  it  makes  for  itself  in  the  field  of  tax 
definitions;  it  is  entirely  pertinent  to  our  immediate  subject  to  see 
if  it  has  any  strongly-entrenched  position  in  the  field  of  taxa- 
tion. We  shall  find  that  it  has  none. 

It  would  be  easy  to  show  that  the  general  current  of  Ameri- 
can jurisprudence  is  directed  away  from  strict  individualism, 
and  flows  with  ever-growing  increments  toward  the  more  com- 
plete merger  of  individual  person  and  individual  right  into  state 
control.  Legislature-made  law  and  judge-made  law  have  kept  al- 
most even  speed  with  each  other  in  drift  toward  that  goal — a 
statement  subject  only  to  the  trifling  correction  that  the  judiciary 
has  not  unfrequently,  in  the  name  of  paramount  law,  made  the 
legislature  turn  back  from  short  cut  and  unconstitutional  chute. 
Willing  or  unwilling  witness,  they  all  tell  the  same  story.  Thus 
Wells:  "The  idea  of  using  the  power  of  taxation  for  other  pur- 


*See  on  this  and  kindred  subjects. my  forthcoming  book  on  Anarchism 
and   Counter-Anarchism. 


HERTIG    ON    TAXATION.  67 

poses  than  that  of  obtaining  revenue  for  defraying  the  necessary 
expenditures  of  the  government,  was  one  hostile  at  the  outset  to 
all  the  beliefs  and  habits  of  thought  of  the  American  people; 
was  totally  incongruous  with  the  social  and  political  system  which 
they  instituted  and  expected."  This,  it  is  true,  is  somewhat 
overdrawn.  James  A.  Garfield  said  in  substance  that  the 
fathers  made  arguments  in  favor  of  protective  tariffs  to  which 
the  protectionists  ot  his  own  day  had  added  nothing  new;  and 
the  reader,  to  find  some  warrant  for  Garfieid's  statement,  need 
not  go  beyond  my  own  brief  reference  ('pp.  19  and  20,  above) 
to  the  debates  in  the  first  congress  under  the  Constitution.  In 
1817,  James  Madison,  often  called  ''the  Father  of  the  Constitu-- 
tion,"  vetoed  a  bill  for  internal  improvement,  which  as  president 
he  could  not  approve,  because  he  thought  it  unconstitutional, 
though  he  looked  with  favor  on  the  improvement  itself  and 
would  gladly  have  approved  the  bill  if  it  could  have  been  pre- 
sented to  him  after  proper  amendment  to  the  Constitution.  No 
such  amendment  has  been  adopted,  and  such  has  been  the  change 
in  practice  and  theory  that  for  a  long  time  no  amendment  on 
the  point  has  been  thought  necessary.  What  a  long  stride  from 
the  strict  theory  of  the  use  of  public  moneys,  as  held  by  Madi- 
son, Monroe  and  others,  to  the  present  theory  and  practice,  under 
which  the  actual  expenditure  by  the  United  States  of  vast  sums 
for  improvement  of  home  rivers  and  harbors,  and  the  proposed 
expenditure  of  two  hundred  million  dollars  abroad  for  building, 
owning  and  operating  an  isthmian  canal,  are  favored  or  opposed 
with  hardly  so  much  as  a  bare  reference  to  the  Constitution! 
When  the  supreme  court  of  the  United  States  began  to  hold  that 
the  state,  notwithstanding  the  individual  ownership  of  grain  ele- 
vators, could  regulate  their  charges,  the  ruling  was  based  on  the 
ground  that  in  the  case  in  hand  the  elevator  men  sat  at  the  re- 
ceipts of  tolls,  "in  the  very  gateway  of  commerce,"  in  a  great 
commercial  mart,  and  by  such  fact  of  location,  had  such  unfair 
advantage  of  the  public  that  the  public  ought  to  have  the  right 
to  regulate. — Munn  v.  Illinois,  94  U.  S.  113.  The  same  emi- 
nent tribunal  has  since  gone  to  the  further  length  of  holding  that 
a  statute  of  North  Dakota  does  not  contravene  the  Federal 
Constitution,  though  that  statute  operates  under  local  physical 
conditions,  making  it  entirely  practicable  for  every  grain  owner 
to  be  his  own  warehouseman,  though  it  prescribe  a  maximum 
storage  rate  which  may  not  be  remunerative,  though  it  make 
what  elevator  it  will  a  public  warehouse  imperatively  bound  to 
receive  and  store  grain,  even  where  the  warehouseman  may 
have  built  and  intended  to  operate,  only  for  handling  his  own 
grain,  necessary  for  use  in  his  individual  business. — Brass  v. 


68  HERTIG    ON     TAXATION. 

North  Dakota,  153  U.  S.  391.  Another  case  this  where  it  is 
appropriate  to  quote  the  dictum  of  the  Boston  representative 
of  Massachusetts  taxation, —"the  individual  person  has  no  in- 
alienable rights  except  that  to  his  own  righteousness."  Yet,  the 
Munn  case,  which  served  as  starting-post  for  the  Brass  case, 
was  itself,  when  first  decided,  considered  a  wide,  a  very  wide, 
departure  from  individualism;  how  wide  was  concisely  stated  by 
my  friend,  V. B.Denslow,  in  the  American  Law  Register  (N.  S.), 
xyi-  539 :  "The  warehouseman  enjoys  no  franchise,  as  does  a 
railroad  company;  has  no  legal  monopoly,  as  had  the  London 
Dock  Company,  in  Aldnutt  v.  Inglis,  12  East,  527;  is  liable  to 
competition  from  whomsoever  chooses  to  invest  his  capital  in 
storing  grain;  it  must  be  remembered  that  no  navigable  waters 
are  appropriated  to  his  private  use;  as  in  the  case  of  wharf  own- 
ers; that  no  exercise  of  the  right  of  eminent  domain  is  pint  forth 
in  his  behalf  by  the  state  to  enable  him  to  build  his  warehouse, 
as  in  the  case  of  canals  and  railroad  companies ;  that  no  improved 
track  is  furnished  at  public  cost  for  his  use,  as  in  the  case  of  cab- 
men; that  no  right  arises  by  presumption  or  otherwise,  as  in  the 
case  of  ferrymen  at  common  law  to  restrain  a  rival  from  enter- 
ing into  the  same  business;  *  *  *  that  he  is  not  even  in- 
corporated;" (and  that  in  short,  there  is  no  plain  and  palpable 
link  between  his  business  and  state  interference  with  the  same.) 

The  individualist  propositions  which  Wells  endeavors  to  for- 
tify most  strongly  are  two, —  (i)  his  personal  doctrinaire  and 
lonesome  proposition  that,  as  Seligman  puts  it  for  him,  ''a  so- 
called  tax  which  looks  to  anything  besides  the  securing  of 
revenue  is  not  a  tax,  but.  an  unconstitutional  exercise  of  the  tax- 
ing power;"  (2)  the  more  widely  held  proposition,  which  is.  as 
phrased  by  himself,  "All  taxes  or  enforced  contributions  levied 
by  a  state  in  virtue  of  its  sovereignty  should  be  solely  (singly) 
and  exclusive?*/  for  public  purposes." — SELIGMAN,  Essays  in 
Taxation  (New  York,  1895),  P-  2^9  \  WELLS,  Theory  and' Prac- 
tice of  Taxation,  287. 

Now,  in  the  first  proposition,  Wells  abandons  the  world  of 
reality  for  the  world  of  fiat  and  of  doctrinaire  dreams.  "Taxa- 
tion for  reform,"  like  all  powers,  as  well  of  nature  as  of  govern- 
ment, is  potent  for  mischief  in  unskilled  or  otherwise  inappro- 
priate hands;  but  from  the  very  abuse  of  a  particular  power  we 
may  argue  to  its  beneficent  use,  and  certainly  its  existence  is 
equally  presupposed  in  use  and  abuse.  Besides,  the  human  will, 
organ  of  human  sentiment,  has  a  logic  of  its  own,  which  consists 
in  taking  or  making  a  path  to>  its  ends,  and  in  leaving  to  word- 
mongers  the  subsequent  burden  of  naming  or  nicknaming 
such  path.  Every  individualist,  in  virtue  of  being  so,  or,  as  the 


HERTIG    ON    TAXATION.  69 

classicists  love  to  say,  ex  m  termini,  concedes  grudgingly  to 
government  whatever  power  he  does  concede.  His  concessions 
are  grudging  in  proportion  to  the  intensity  of  his  individualism, 
until,  arrived  at  the  extreme  summit  and  peak  of  individualism, 
which  extreme  is  theoretical  anarchism,  he  bluntly  refuses  to 
concede  to  government  any  powers,  holding  all  its  powers  to  be 
spurious  in  title  and  abominable  usurpation  in  practice.  Half- 
way or  quasi-individualists,  like  Wells,  are  in  perpetual  self-con- 
tradiction. They  would  be  governed,  and  yet  not  governed;  they 
refuse  to  accept  sovereign  governments  as  they  are  in  the 
word  of  reality,  and  yet  are  so  far  attracted  toward  them  as  to 
lack  somewhat  in  wing-and-will  power  for  soaring  to  the  dreamy 
heights  of  theoretical  anarchism  with  its  no  government  and  its 
sweet  paralysis  of  human  nature.  Cooley  as  a  judge,  helping 
with  others  to  exercise  the  sovereignty  of  government,  must 
from  that  very  fact  compromise  with  his  quasi  individualism 
much  oftener  and  more  deeply  than  Wells.  A  jurist  is  consti- 
tutionally incapable  of  disregarding  continuously  the  facts  about, 
and  especially  the  facts  behind  him.  Chief  Justice  Taney,  suc- 
ceeding Chief  Justice  Marshall,  may  occasionally  run,  or  try 
to,  a  chute  into  which  Marshall  would  not  have  entered;  but 
Taney  can  no  more  quit  long  the  main  channel  which  Marshall 
dredged,  filled  and  buoyed  than  river  pilot  can  disregard  his 
"marks"  when  there  is  no  inundation.  Cooley,  therefore,  must 
fail  Wells  when  the  latter  needs  him  most.  In  earlier  days, 
when  saloon-keepers  first  asked.  "How  can  this  be  a  free  country, 
when  you  make  us  take  out  a  license  and  not  other  merchants? 
How  does  the  state  constitution  protect  us  with  its  requirement 
of  equal  and  uniform  taxation,  or  taxation  in  proportion  to  the 
valuation  of  property,  when  you  tax  us  on  property  and  make  us 
pay  also  a  license?" — the  seeming  awkwardness  of  these  ques- 
tions, very  awkward,  indeed,  if  declaration  of  independence  and 
constitutional  catch-words  had  anything  like  the  meaning  attached 
to  them  in  the  mind  and  heart  of  the  people — was  promptly  and 
judicially  overcome  with  answer  and  corresponding  judgment: 
"Oh,  your  licenses  are  not  imposed  by  way  of  tax,  nor  by  the 
taxing  power;  they  are  imposed  by,  and  in  the  exercise  of  'the 
police  power/  which  is  one  of  those  little  incidents  of  sovereignty 
rot  generally  mentioned  in  Declarations  of  Independence  and 
Bills  of  Rights.  States  may  die,  but  the  police  power  never 
surrenders.  Foreign  yokes  may  be  thrown  off,  but  the  police 
power,  never!" 

Such  grounds  for  sustaining  liquor  licenses  passed  muster 
reasonably  well;  but  to  stretch  the  police  power  into  covering 
all  manner  of  licenses,  or  to  compress  all  special  taxes  into  a 


TO  HERTIG    ON    TAXATION. 

category  which  the  police  power  would  cover  without  stretching 
—was  too  much  for  the  logic,  and  incidentally  for  the  stomach, 
of  the  American  judiciary;  hence  eventually  most  courts  took  the 
broad  ground  that  where  license  fees  or  like  special  taxes  are 
plainly  imposed  for  purposes  of  revenue  [and  where  the  notion  of 
police  regulation  is  too  remote  for  common  sense  to  accept],  they 
are  taxes  imposed  by  and  in  the  exercise  of  the  taxing  power  [and 
if  there  is  a  constitutional  mandate  to  tax  in  proportion  to  value, 
or  by  uniform  rate  on  valuation,  then  such  taxes  must  either 
be  declared  unconstitutional,  or  some  other  way  than  appeal  to 
the  police  power  must  be  found  for  declaring  them  constitu- 
tional.] As  the  court  said  in  Glascow  v.  Rouse  (p.  52,  above), 
"Every  burden  which  the  state  imposes  upon  its  citizens  with 
a  view  to  revenue,  to  carry  on  the  operations  of  the  state  gov- 
ernment, or  for  the  support  of  municipal  corporations,  is  a 
branch  of  the  power  of  taxation,  whether  imposed  under  the 
name  of  a  tax  or  some  other  designation." 

As  above  said,  Cooley  fails  Wells  when  the  latter  needs  him 
most;  and  as  above  intimated,  the  reason  is  that  Cooley  as  a 
jurist  is  bound,  or  under  philosophical  necessity,  to  recognize  too 
many  established  facts  contributing  to  the  meaning  of  tax  and 
taxation  to  admit  that  a  tax,  for  other  than  revenue  is  not  a 
tax,  "but  an  unconstitutional  exercise  of  the  taxing  power."  The 
highest  art  of  the  definition-framer  is  to  remember,  when  fram- 
ing, what  he  really  knows  about  the  subject  matter  of  his  defini- 
tion, and  what  on  cross-examination  he  would  cheerfully 
admit.  Cooley  could  lamentably  fail  in  this  respect;  but  he 
cannot  fail  to  affirm  or  deny  what  comes  to  him  in  the  form  of  a 
legal  proposition,  stripped  of  latent  disguise.  He  admits  the 
police  power,  has  pondered  over  and  perhaps  helped  to  make  the 
vagueness  of  its  limitations.  He  cannot  help  knowing  and  de- 
claring that  there  may  be  a  police  power  within  the  taxing 
power  proper,  as  well  as  a  certain  taxing  power  within  the  forms 
of  the  police  power.  He  knows  and  quotes  the  vigorous  claim 
which  Justice  Story  makes  in  Sec.  965  of  his  Commentaries  on 
the  Constitution  that  the  taxing  power  includes  other  powers  :* 
knows,  too,  that  later  practice  sanctions  wide  claim.  He  ad- 


*Justice  Story  says  in  section  mentioned :  "The  absolute  power  to 
levy  taxes  includes  the  power  in  every  form  in  which  it  may  be  used, 
and  for  every  purpose  to  which  the  legislature  may  choose  to  apply  it. 
This  results  from  the  very  nature  of  such  an  unrestricted  power.  A 
fortiori,  it  might  be  applied  by  congress  to  purposes  for  which  nations 
have  been  accustomed  to  apply  it.  Now,  nothing  is  more  clear  from  the 
history  of  commercial  nations,  than  the  fact  that  the  taxing  power  is 
often,  very  often  applied  for  other  purposes  than  revenue.  It  is  often  ap- 
plied as  a  regulation  of  commerce.  It  is  often  applied  as  a  virtual  pro- 


HERTIG    ON    TAXATION.  71 

mits,  therefore,  "that  other  considerations  than  those  which  re- 
gard the  production  of  revenue  are  admissible,  and  that  regu- 
lation may  be  kept  in  view  when  revenue  is  the  main  and  primary 
purpose" ;  that  ''the  right  of  sovereignty  to  look  beyond  the  im- 
mediate purpose  to  the  general  effect,  neither  is  nor  can  be  dis- 
puted."— Taxation  (2nd  ed.)  p.  587.  Nay,  Cooley  will  do  more 
than  admit;  he  will  even  advocate.  His  later  writings  (essays 
and  occasional  pieces)  betray  a  curious  note  of  apprehension, 
as  it  were  a  dawning  consciousness  that  there  are  forces  in 
society  that  will  by  no  means  keep  within  the  bounds  contem- 
plated for  them  by  humdrum,  quasi-  individualistic,  judge-made 
optimism.  The  pride  and  pomp  of  the  Louisiana  lottery  stir  his 
soul  in  its  ethical  depths.  If  ever  before  he  inclined  to  divorce 
the  taxing  from  the  police  power,  he  will  now  make  penitent 
amends;  he  will  even  gladly  see  the  United  States  government, 
under  guise  of  a  revenue  law,  regulate  the  domestic  affairs  of 
Louisiana  by  taxing  her  lottery  to  death! — Atlantic  Monthly, 
April,  1892.  Wells  can  only  deplore  this  lapse  of  "high  judicial 
authority"  that  would  "employ  federal  taxation  for  the  crushing 
out  of  state  lotteries  with  the  absurd  accompaniment  of  no 
revenue  (taxes);  for  if  the  desired  object  is  attained,  the  payment 
of  taxes  and  the  procurement  of  revenue  will  be  prevented. "- 
Theory'  and1  Practice,  262.  He  shudders  in  detailing  the  over- 
shadowing height  to  which  such  power  might  shoot,  if  once  its 
swaddling  bands  were  cut  by  the  precedent  which  Cooley's  "high 
judicial  authority"  stood  ready  to  sanction,  if  congress  would 
but  do  its  part.  It  could  destroy  "nearly  every  faculty  or  power 
now  belonging  to  and  exercised  by  the  several  states";  could 
regulate  or  suppress  not  lotteries  alone,  but  "houses  of  prostitu- 
tion, gambling  and  liquor  saloons,  opium  'joints',  and  other 
haunts  of  vice  now  under  the  control  and  supervision  of  the  po- 
lice powers  of  the  states."  So  it  could,  and  so  it  can,  if — it  but 
dares  to  do,  and  finds  acquiescence.  We  are  so  concerned  over 
wire-drawn  and  wide-mesh  definitions  and  limitations,  loose 


hibition  upon  the  importation  of  particular  articles,  for  the  encouragement 
and  protection  of  domestic  products  and  industry ;  for  the  support  of 
agriculture,  commerce  and  manufactures  (Hamilton's  Reports  on  Man- 
ufactures, in  1791)  ;  for  retaliation  upon  foreign  monopolies  and  injuri- 
ous restrictions  (  *  *  Jefferson's  Report  on  Commercial  Restrictions, 
in  1793 ;  [vol.]  5,  Marshall's  Life  of  Washington,  ch.  7,  :  * ; 

[vol.]  i,  Wait's  State  Papers,  422,  434)  ;  for  mere  purposes  of  state 
policy  and  domestic  economy;  sometimes  to  banish  a  noxious  article  of 
consumption;  sometimes  as  a  bounty  upon  an  infant  manufacture  or 
agricultural  product ;  sometimes  as  a  suppression  of  particular  employ- 
ments ;  sometimes  as  a  prerogative  power  to  destroy  competition  and 
secure  a  monopoly  to  the  government. — *  *  Smith's  Wealth  of  Nations, 
p.  5,  ch.  2,  art.  4." 


™  HERTIG    ON     TAXATION. 

generalizations  and  trite  maxims  that  we  seldom  have  room  or 
time  for  the  very  simple  truth  that  to  do  and  get  your  doing 
acquiesced  in  is  the  sum  and  substance  of  all  government. 

The  second  fortified  proposition  of  the  Wells  individualism, 
— taxes  must  be  for  public  purposes  only,  is,  it  may  be  conceded, 
well  taken,  in  so  far  as  it  is  not  an  identical  proposition,  in  so 
far  as  Caesar's  tax  and  Caesar's  purpose  are  not  alike  branded 
public  by  the  very  imprint  of  Caesar's  stamp.  But  in  so  far  as 
it  is  not  an  identical  proposition,  in  so  far  as  public  pur- 
pose does  not  necessarily  and  inseparably  inhere  in  the' 
word  tax,  it  does  not  make  for  the  Wells  individualism, 
but  for  the  Hertig  paternalism.  Here  Wells  and  I  pur- 
sue the  same  ideal;  only  he  does  not  know  what  to  do  with 
the  object  of  his  choice,  while  I — but  that  is  a  different  story. 
Here  he  is  not  under  the  cruel  necessity  of  parting  company 
with  his  friend  Cooley,  but  leans  on  him  heavily  and  on  his 
opinion,  as  the  organ  of  the  supreme  court  of  Michigan,  in  Peo- 
ple v.  Township,  20  Mich.  452.  Said  Cooley  in  that  case :  "In 
respect  to  certain  things  of  absolute  necessity  to  civilized 
society,  the  state  is  precluded  either  by  express  constitutional 
provision  or  by  necessary  implication,  from  providing  for  at  all, 
and  which  are  thus  left  wholly  to  the  fostering  care  of  private  en- 
terprise and  private  liberality.  [Express  constitutional  provisions 
last  only  until  they  are  changed;  and  neither  'necessary'  nor  un- 
necessary 'implications'  preclude  the  people  from  attempting  in 
their  associated  capacity  as  a  state  whatever  they  shall  choose  to 
attempt.  The  only  limitations  on  attempt  and  accomplishment 
are  human  nature  and  human  environment — another  simple 
truth  which  timidity  would  cover  with  the  drapery  of  bad  meta- 
physics.] *  *  *  Certain  professions  and  occupations  in 
life  are  *  *  essential,  but  we  have  no  authority  to  employ 
the  public  money  to  induce  persons  to  enter  them.  [True  in  a 
sense,  but  not  vitally  nor  necessarily  true.  We  have  the 
authority  to  confer  whenever  it  shall  seem  to  us  sufficiently 
essential  to  do  so.  We  employ  the  public  money  and  promise 
commissions  as  officials  to  young  men  to  induce  them  to  enter 
upon  the  profession  of  arms  at  West  Point  and  Annapolis.  There 
is  many  an  abuse,  direct  or  indirect,  in  this  kind,  fruit  of  parasi- 
tic paternalism,  which  the  right  paternalism  will  correct.]  The 
public  necessity  for  an  educated,  skillful  physician  in  some  par- 
ticular locality  may  be  great  and  pressing,  yet,  if  the  people 
should  be  taxed  to  hire  one  to  locate  there  the  common  voice 
would  exclaim  that  the  public  moneys  were  being  devoted  to  a 
private  purpose.  [It  is  conceded  that  penitentiaries  occupy  'par- 
ticular' localities,  yet  the  common  voice  does  not  exclaim  that 


HERTIG    ON    TAXATION.  73 

the  public  moneys  paid  to  penitentiary,  physicians  are  being  de- 
voted to  a  private  purpose.  The  educational  authorities  in  Chi- 
cago supervise  their  schools,  all  in  particular  localities,  and 
have  at  times  been  paternal  enough  to  employ  physicians  to  go 
there  at  stated  times  and  medically  inspect  the  pupils.  I  accept 
as  perfectly  valid  the  opinion  of  grade  teachers  there  that 
the  expenditures  in  that  behalf  were  foolish,  yet  they  were  un- 
doubtedly for  a  public  purpose.  I  am  not  captious;  I  am  aware 
that  Cooley,  though  he  does  not  say  so,  means,  by  the  phrase  "in 
some  particular  locality,"  in  some  particular  community  enjoy- 
ing the  usual  American  privilege  of  local  self-government;  but 
by  "necessary  implication,"  he  tacitly  assumes  two  kinds  of  pub- 
lic necessity,  the  kind  that  does  and  the  kind  that  does  not  war- 
rant the  expenditure  of  public  funds ;  his  thought  stalks  in  very 
loose-jointed  armor;  and  that  fact  affords  an  opportunity  to  ac- 
cent the  further  fact  that  he  misses  throughout  this  discussion 
what  ought  to  be  its  fundamental  underlying  proposition,  un- 
consciously suggested  in  the  very  mention  of  his  "express  con- 
stitutional provisions"  and  "necessary  implications," — to  the 
extent  that  the  public  is  its  own  master,  it  is  its  own  judge  as 
to  what  is  and  what  is  not  such  public  necessity  as  to  justify 
and  demand  the  expenditure  of  public  moneys.  For  the  rest, 
Cooley's  illustration  from  the  need  of  a  physician  is  hardly  a 
happy  one ;  it  sometimes  does  happen  in  a  new  community  that  a 
good  young  physician  is  attracted  or  held  for  the  time  being  by 
some  salaried  office,  such  as  town  physician  or  the  like,  to  which 
the  local  authorities  affix  greater  compensation  than  they  would 
otherwise.  Thus  even  where  the  public  is  not  entirely  its  own 
master  it  may  covertly  make  a  public  purpose  of  what  superior 
authority  would  regard  as  a  private  one.]  The  opening  of  a  new 
street  in  a  city  or  village  may  be  of  trifling  importance  as  com- 
pared with  the  location  within  it  of  some  new  business  or  manu- 
facture, but  while  the  right  to  pay  out  the  public  funds  for  the 
one  would  be  unquestionable,  the  other  by  common  consent  is 
classified  as  a  private  interest  which  the  public  fcan  aid  as  indi- 
viduals, if  they  see  fit,  while  they  are  not  permitted  to  employ 
the  machinery  of  government  to  that  end.  [Another  unlucky 
illustration!  The  good  people  of  St.  Cloud,  Minnesota,  not  to 
mention  many  another  town,  can  point  to  the  ashes  of  a  saw- 
mill and  to  the  marks  of  some  other  private  enterprises  which, 
in  their  corporate  capacity,  they  were  permitted  to,  and  did,  aid 
largely  out  of  a  so-called  "bonus  fund."  It  is  one  thing  to  say 
what  in  the  technical  law  of  a  particular  state  at  a  particular 
time  was  a  "public  purpose;"  herein  Cooley  is  right;  it  is  en- 
tirely a  different  thing  to  affix  "common  consent"  to  such  doc-' 


74  HERTIG    ON     TAXATION. 

trine  of  technical  law  and  imply  that  it  is  universal  and  perma- 
nent; herein  Cooley  is  wrong,  and  indeed  from  the  view-point  of 
any  comprehensive  judgment,  a  weak  blunderer.  Like  many 
another  judge,  he  confounds  what  is,  and  especially  what  may 
be,  with  what  he  thinks  ought  to  be.  To  say  what  is  a  public 
purpose  is  a  judicial  function  only  to  the  extent  that  the  public 
has  not  otherwise  authoritatively  declared  what  is  such  a  pur- 
pose. Where  the  legislature  has  power  and  uses  it,  judges  have 
decided  over  and  over  again  that  they  cannot  question  the  legis- 
lative discretion  nor  the  legislature's  motives.  The  same  princi- 
ple of  decision  must  of  necessjty  be  applied  to  public  purpose 
whenever  the  public  shall  choose  to  limit  judicial  discretion  in 
that  behalf.]  *  *  * 

"By  common  consent,  also,  a  large  portion  of  the  most  urg- 
ent needs  of  society  are  relegated  exclusively  to  the  law  of  de- 
mand and  supply.  It  is  this  in  its  natural  operation  and  without 
interference  of  the  government  that  gives  us  the  proper  propor- 
tion of  tillers  of  the  soil,  artisans,  manufacturers,  merchants,  and 
professional  men,  and  that  determines  when  and  where  they 
shall  give  to  society  the  benefit  of  their  particular  services.  How- 
ever great  the  need  in  the  direction  of  any  particular  calling,  the 
interference  of  government  is  not  tolerated,  because,  though  it 
might  be  supplying  a  public  want,  it  is  considered  as  invading 
the  domain  that  belongs  exclusively  to  private  inclination  and 
enterprise.  We  perceive,  therefore,  that  tbe  term  public  pur- 
pose, as  employed  to  denote  the  objects  for  which  taxes  may  be 
levied,  has  no  relation  to  the  urgency  of  the  public  need  or  to  the 
extent  of  the  public  benefit  which  is  to  follow.  It  is.  on  the  other 
hand,  merely  a  term  of  classification  to  distinguish  the  objects 
for  which,  according  to  settled  usage,  the  government  is  to  pro- 
vide, from  those  which,  by  the  like  usage,  are  left  to  private  in- 
clination, interest,  or  liberality." 

On  the  foregoing,  which  is  the  last  paragraph  quoted  by 
Wells  from  Cooley's  opinion  in  People  v.  Township,  my  ob- 
servations shall,  be  confined  to  two  points.  If  Cooley  had  said 
that  the  law  of  demand  and  supply  gives  us  the  best  obtainable 
proportion  of  farmers,  tradesmen  and  the  like,  such  declaration 
would  have  been  less  objectionable  than  his  chosen  one,  that 
said  law  gives  us  "the  proper  proportion,"  etc.  Besides  he  ig- 
nores those  trades  union  measures  which  in  some  cases  restrict 
the  number  of  apprentices,  and  consequently  of  workmen,  in  a 
given  calling  with  almost  the  efficiency  of  a  positive  and  well- 
executed  law  emanating  from  state  authority.  The  over-crowd- 
ing of  professions,  admitted  to  be  a  fact,  is  but  one  of  the  nu- 
merous instances  wherein  the  law  of  supply  and  demand  does 


HERTIG    ON     TAXATION.  75 

not  give  a  proper  proportion.  The  shallow  optimism  which  in- 
spired Cooley  to  write  "proper  proportion"  precluded  of  course 
any  consideration  by  him  of  remedy  for  what  he  thought  to  be 
the  soundest  health.  A  discreet  paternalism  will  not  squander 
public  funds  for  the  creation  of  parasitic  opportunities;  these  in- 
deed it  will  cut  off;  but,,  it  will  create  opportunities  for  social 
units  of  convenient  size  to  sustain  themselves  in  self-respect  and 
decent  comfort;  with  these,  gradually  create  a  public  opinion 
which  shall  draw  to  the  abundant  measure  of  the  new  oppor- 
tunities the  very  best  of  young  brain  and  young  blood  to  demon- 
strate by  sturdy  and  continuous  individual  development, 
through  social  development,  that  the  new  paternalism  will  have 
come  to  stay,  and  to  demolish  many  an  idol  of  den,  tribe,  mar- 
ket-place and  theatre,  to  their  votaries  seeming  greater  perhaps 
than  Diana  of  Ephesus  did  to  hers.  Good  people,  don't  begin  to 
bawl  socialist  at  me:  I  know  too  well  the  tenacity  with  which 
average  human  nature  clings  to  and  chases,  a  hundred  dollars, 
clings  to  this,  that  and  the  other  tangible  thing  with  a  yearning 
that  feels  in  the  possession  of  such  thing  as  its  very  own  the 
sweetest,  fondest  ideal  realized — know  these  and  a  thousand 
other  things  that  enter  into  a  reasonably  full  inventory  of  human 
nature — know  them  too  well  to  entertain  for  one  moment  the 
idle  dream  of  an  enforced,  an  universal  collectivism.  It  takes  all 
kinds  of  people  to  make  a  world,  takes  all  manner  of  holdings  to 
exhaust  the  meaning  and  the  fact  of  property,  takes  the  old  and 
the  new  sorts  and  conditions  of  men  to  make  the  civil  nation. 
Since  nobody  else  claims  it,  I  put  my  hall-mark  and  a  new  mean- 
ing on  paternalism,  and  will  show  in  other  time  and  place  its 
fuller  port  and  significance  as  rebuilt  and  launched  by  me. 

It  is  sufficiently  apparent  from  what  I  have  already  said  that 
Cooley's  classification  of  "public  purpose"  as  determined  "ac- 
cording to  settled  usage"  is  valid  only  as  a  matter  of  local  tech- 
nical law  and  of  local  usage,  which  is  subject  at  any  time  to  be- 
coming unsettled  or  resettled  by  authoritative  declaration  of  the 
people.  In  fact  Cooley  himself  felt  the  vagueness  of  his  own, 
and  the  difficulty  of  making  any,  line  of  distinction,  having  said 
as  Wells  quotes  him  (Theofy  and  Practice,  289),  that  "there  is  no 
such  thing  as  drawing  a  clear  line  of  distinction  between  pur- 
poses of  a  public  and  those  of  a  private  nature."  It  is  apparent 
that  a  public,  like  any  other  purpose,  may  be  inopportune  or  in- 
discreet. The  test  then,  does  not  lie  in  discretion  or  indiscre- 
tion. In  a  despotism,  the  declaration  of  Caesar  that  a  proposed 
exaction  shall  be  called  a  tax  makes  it  so  and  makes  its  purpose 
technically  public,  or  in  Austin's  sense  "legally  just."  It  is 
in  no  wise  different  where  the  people  speak  with  full  author- 


76  HERTIG    ON     TAXATION. 

ity.  I  have  said  that  in  so  far  as  the  proposition,  taxes  must  be 
for  public  purposes,  has  any  real  meaning,  it  makes  for  my  pa- 
ternalism. Now,  in  the  cases  where  our  courts  have  held  taxes 
to  be  so  only  in  name  because  not  for  a  purpose  which  the  judges 
would  consent  to  call  "public/  the  point  on  which  they  all  turn 
is  that  some  individual  is,  or  expects  to  be,  unduly  or  dispro- 
portionately benefited  by  them — claims  them  for  building  a  road 
which  he  will  own  and  operate  or  for  building  a  factory  for  his 
individual  business.  And  the  principle  established  by  these  cases 
may  be  thus  worded :  Individualism,  under  "cover  of  tax-laws, 
must  not  be  permitted  to  prey  on  the  public.  This,  as  far  as 
it  goes,  is  just  my  position;  and  certainly,  whether  it  be  regarded 
as  a  self-imposed  limitation  of  individualism  or  a  limitation  im- 
posed by  collective  social  consciousness,  it  is  none  the  less  .a 
limitation  and  a  proper  one,  entirely  acceptable  to  any  discreet 
paternalism. 


CHAPTER  VI. 


The  dictum  of  Justice  Miller  on  the  theory  of  our  governments — Austin 
on  the  sanctions  of  constitutional  law — Where  constitution  unwritten, 
sanctions  "moral"  only — Moral  sanctions  explained  by  the  collective 
temper  or  conscience  of  the  effective  majority — No  unconstitutional  act 
is  illegal  when  all  the  departments  of  government  sustain  it,  and  this 
whether  constitution  is  written  or  unwritten — A  true  sovereign,  whether 
prince  or  people,  is  incapable  of  legal  limitation — People  by  amending 
constitution  could  create  fegal  antinomy — Effective  limitation  of  written 
constitutions  lie  outside  them — Legal  profession  as  proximately  deter- 
mining our  constitutions — Police  power  from  different  standpoints. 


All  shades  of  individualism  have  this  in  common  that  they 
are  suspicious  of  government  powers,  look  with  alarm  on  their 
possibilities  even  where  conceding  that  those  powers  exist,  and 
that  they  should  in  some  degree,  be  exercised.  Hence  the  ap- 
prehension with  which  Wells  and  individualists  generally  look 
on  the  tremendous  and  as  yet  comparatively  unused  powers  of 
taxation  which  may  be  developed  by  federal  and  state  govern- 
ments in  the  United  States ;  hence  the  approval  and  anxious  zeal 
with  which  they  quote  the  words  of  Justice  Miller  as  organ  of 
the  .supreme  court  of  the  United  States  in  Loan  Association  v. 
Topeka,  20  Wall.  655, — "The  theory  of  our  government,  state 
and  national,  is  opposed  to  the  deposit  of  unlimited  power  any- 
where." This  sentence  sounds  well,  and  in  a  sense  states  a  truth, 
much  of  the  same  order  as  that  stated  in  the  proposition, — all 
plane  surfaces  are  flat.  All  powers  exercised  under  written 
constitutions,  by  the  very  force  of  the  term,  written  constitution, 
bear  the  hall-mark  "limited."  Every  grant  connotes  a  limita- 
tion; and  every  constitution  is  a  grant, — true  when  we  say  that 
the  Constitution  of  the  United  States  confers  only  such  powers 
as  it  expressly  or  impliedly  grants;  equally  true,  when  we  say 
technically  that  our  American  state  governments  have  in  full 
measure  every  governmental  power  not  forbidden  them  in  the 
federal  Constitution  nor  limited  by  their  respective  state  consti- 
tutions. So  also  a  limitation  was  expressed  in  the  saying,  "Rus- 


78 


HERTIG    ON    TAXATION. 


sia  is  a  despotism  tempered  by  assassination."  The  ultimates  of 
government  and  of  jurisprudence  are  not  very  often  nor  very 
well  discussed  by  American  judges;  they  have  seldom  needed  to 
discuss  them  for  one  thing;  and,  perhaps  it  should  be  added,  a 
latent  cowardice  in  the  greater  number  of  them  has  not  contribu- 
ted to  their  competency  in  that  behalf. 

To  estimate  properly  the  true  nature  and  extent  of  limitations 
on  taxing  powers,  or  on  any  governmental  powers  in  the  United 
States,  one  may  examine  with  advantage  constitutional  limita- 
tions as  existing  and  understood  in  Great  Britain.  As  they  have 
no  constitution  there,  in  our  sense — no  written  instrument  call- 
ed constitution — whatever  the  British  Parliament  enacts  in  due 
form  of  law  is  a  valid  and  binding  statute  within  British  juris- 
diction, until  amended  or  repealed.  It  may  be  called  uncon- 
stitutional; it  cannot  be  called  illegal.  Now,  as  Austin  says:  'Tn 
every,  or  almost  every,  independent  political  society,  there  are 
principles  or  maxims  which  the  sovereign  [whether  -  absolute 
monarch,  governing  oligarchy,  or  broad  democracy],  habitually 
observes,  and  which  the  bulk  of  the  society,  or  the  bulk  of  its  in- 
fluential members,  regard  with  feelings  of  approbation.  Not 
unfrequently,  such  maxims  are  expressly  adopted,  as  well  as 
habitually  observed,  by  the  sovereign  or  state,  but  are  simply 
imposed  upon  it  by  opinions  prevalent  in  the  community. 
Whether  they  are  expressly  adopted  by  the  sovereign  or  state, 
or  are  simply  imposed  upon  it  by  opinions  prevalent  in  the  com- 
munity, it  [the  sovereign,  or  state]  is  bound  or  constrained  to 
observe  them  by  merely  moral  sanctions.  Or  (changing  the 
phrase)  .in  case  it  ventured  to  deviate  from  a  maxim  of  the 
kind  in  question,  it  would  not  and  could  not  incur  a  legal  pain  or 
penalty,  but  it  probably  would  incur  censure,  and  might  chance 
to  meet  with  resistance,  from  the  generality  or  bulk  of  the  gov- 
erned." [That  is  to  say,  where  there  is  no  written  constitution, 
it  is  the  collective  temper,  or  collective  conscience,  of  the  effect- 
ive majority  evidenced  by  maxims,  professions  of  political  faith, 
judicial  decisions  and  the  like,  that  is  the  constitution;  and  practi- 
cal constitutionality  consists  in  keeping  within  the  limit  of  what 
that  portion  of  the  people  composing  or  capable  of  composing  an 
effective  majority  will  stand.]  Hence,  concludes  Austin,  "if  a 
law  or  other  act  of  a  monarch  or  sovereign  number  conflict  with 
a  maxim  of  the  kind  to  which  I  have  adverted  above,  the  law 
or  other  act  may  be  called  unconstitutional  (in  that  more  gen- 
eral meaning  which  is  sometimes  given  to  the  epithet).  For 
example :  The  ex  post  facto  statutes  which  are  styled  acts  of 
attainder,  may  be  called  unconstitutional,  though  they  cannot  be 
called  illegal.  For  they  conflict  with  a  principle  of  legislation 


HERTIG    ON     TAXATION.  79 

which  parliament  has  habitually  observed,  and  which  is  regarded 
with  approbation  by  the  bulk  of  the  British  community. 

"In  short,  when  we  style  an  act  of  a  sovereign  an  unconstitu- 
tional act  [in  the  more  general  import  of  the  epithet],  we  mean 
this :  That  the  act  is  inconsistent  with  some  given  prin- 
ciple or  maxim;  that  the  given  supreme  government  has  ex- 
pressly adopted  the  principle,  or,  at  least,  has  habitually  ob- 
served it;  that  the  bulk  of  the  given  society,  or  the  bulk  of  its 
influential  members  [that  is,  its  effective  majority]  regard  the 
principle  with  approbation;  and  that,  since  the  supreme  govern- 
ment has  habitually  observed  the  principle,  and  since  the  bulk 
of  the  society  regard  it  with  approbation,  the  act  in  question 
must  thwart  the  expectations  of  the  latter,  and  must  shock  their 
opinions  and  sentiments.  Unless  we  mean  this,  we  merely 
mean  that  we  deem  the  act  in  question  generally  pernicious;  or 
•that,  without  a  definite  reason  for  the  disapprobation  which  we 
feel,  we  regard  the  act  with  dislike." 

After  the  foregoing-quoted  considerations  on  "unconstitu- 
tional" in  its  more  general  sense,  Austin  passes  to  the  scrutiny 
of  its  "more  special  and  definite"  meaning,  when  the  use  of  the 
word  "imports  that  the  conduct  in  question  conflicts  with  consti- 
tutional law."  And  by  the  expression  constitutional  law  Austin 
means  "the  positive  morality  or  the  compound  of  positive  moral- 
ity and  positive  law,  which  fixes  the  constitution  or  structure  of 
the  given  supreme  government, — *  *  the  positive  mor- 

ality, or  the  compound  of  positive  morality  and  positive  law, 
which  determines  the  character  of  the  person  or  the  respective 
characters  of  the  persons,  in  whom,  for  the  time  being,  the 
sovereignty  shall  reside;  and,  supposing  the  government  in  ques- 
tion an  autocracy  or  government  of  a  number  [the  positive  mor- 
ality, or  the  compound  of  positive  morality  and  positive  law], 
which  determines  moreover  the  mode  wherein  the  sovereign  pow- 
ers shall  be  shared  by  the  constituent  members  of  the  sovereign 
number  or  body. 

"Now,"  continues  Austin,  "against  a  monarch  properly  so- 
called,  or  against  a  sovereign  body  in  its  collegiate  and  sovereign 
capacity — [and  the  people  in  their  collegiate  and  sovereign  ca- 
pacity are  a  sovereign  body] — constitutional  law  is  positive,  mor- 
ality merely,  or  is'  enforced  merely  by  moral  sanctions:  though, 
as  I  shall  show  hereafter,  it  may  amount  to  positive  law,  or  may 
be  enforced  by  legal  sanctions,  against  the  members  of  the  body 
considered  severally.  [The  positive  law  that  may  be  enforced 
by  legal  sanctions,  such  as  impeachment,  removal  from  office, 
indictment  for  malfeasance,  and  the  like,— against  the  members 
of  the  sovereign  body  considered  severally,  applies  only  to  the 


80  HERTIG     ON    TAXATION. 

occasional  officer  or  other  active  member  of  the  governing  body 
who  may  commit  a  breach  of  constitutional  law.  Where  the 
different  departments  of  the  government  aid,  abet  and  sustain 
each  other  in  such  breach,  then,  as  well  under  our  written,  as  un- 
der British  unwritten,  constitutions,  there  is  legality  hand  in 
glove  with  unconstitutionally.  In  other  words  governing  bodies 
'  rnpv  with  legal  impunity  transcend  written  or  unwritten  consti- 
tutional limitations.  We  are  entirely  familiar  with  the  fact  and 
the  principle  that  no  penalty  attaches  to  congress  or  to  state 
legislatures  for  passing  unconstitutional  measures;  we  need  ex- 
tend the  principle,  or  rather  follow  it,  a  little  further  to  see  how 
impregnable  is  Austin's  position,  and  with  what  slight  changes 
in  wording  it  applies  as  well  to  our  governments  as  to  that  of 
Great  Britain.]  The  sovereign  for  the  time  being,  or  the  pred- 
ecessors of  the  sovereign,  may  have  expressly  adopted,  and  ex- 
pressly promised  to  observe  it  [constitutional  law] .  But  whethef 
constitutional  law  has  thus  been  expressly  adopted  [prescribed 
in  written  constitutions],  or  simply  consists  of  principles  current 
in  the  political  community,  it  is  merely  guarded,  against  the  sov- 
ereign, by  sentiments  or  feelings  of  the  governed.  Consequent- 
ly, although  an  act  of  the  sovereign  which  violates  constitutional 
law,  may  be  styled  with  propriety  unconstitutional,  it  is  not  an 
infringement  of  law  simply 'and  strictly  so-called,  and  cannot 
be  styled  with  propriety  illegal." — JOHN  AUSTIN,  Lectures  on 
Jurisprudence,  I.  266-7. 

The  power  of  a  sovereign,  then,  "is  incapable  of  legal  limita- 
tion," as  Austin  justly  says, — meaning  "by  a  'sovereign.'  a  mon- 
arch properly  socalled,  or  a  sovereign  number  in  its  collegiate 
and  sovereign  capacity.  Considered  collectively,  or  considered 
in  its  corporate  character,  a  sovereign  number  is  sovereign  and 
independent;  but,  considered  severally,  the  individuals  and  small- 
er aggregates  composing  that  sovereign  number  are  subject  to 
the  supreme  body  of  which  they  are  component  parts." — Id.  269. 
The  sovereign  people  acknowledge  no  legal  limitation  on  them- 
selves "in  their  collegiate  and  sovereign  capacity."  As  James 
Wilson  said,  and  in  substance  the  other  fathers  with  him,  the 
people  "always  retain  the  right  of  abolishing,  altering,  or  amend- 
ing their  constitution,  at  whatever  time,  and  in  whatever  manner, 
they  shall  deem  it  expedient."  Now  it  is  only  "positive  moral- 
ity" in  Austin's  sense — meaning,  in  fact,  that  aggregate  of  cus- 
tomary sentiment  which  I  have  above  called  the  collective  con- 
science of  the  effective  majority — that  limits  the  power  of  the 
people  in  their  sovereign  capacity.  This  is  a  very  real  limitation, 
but  in  no  sense  a  legal  one.  It  is  rigidly  unconstitutional 
throughout  the  United  States  to  make  a  crime  of  and  punish, 


HERTIG    ON     TAXATION.  81 

that  which  was  not  a  crime  at  the  time  of  doing  it.  Tf  now  the 
Constitution  of  the  United  States  were  to  be  amended,  and  slich 
amendment  should  expressly  empower  congress  to  pass  bills  of 
attainder  and  ex  post  facto  laws  that  should  be  retrospective  in 
every  essential  particular  for  a  period  of  five  years,  or  other 
period,  prior  to  the  adoption  of  the  amendment,  it  would  be  pos- 
sible and  legal  under  such  laws  to  be  so  passed  to  make  a  crim- 
inal of  a  man,  and  forfeit  his  estate,  for  doing  what  in  a  legal 
sense  was  entirely  right  and  proper  at  the  time  of  doing  it.  The 
Constitution  as  it  would  then  stand  would  directly  conflict  with 
the  Constitution  as  it  now  stands;  the  new  would  make  good  its 
conflicting  right  to  prevail  as  of  a  past  time  when  the  old  actually 
prevailed  unopposed.  The  hypothesis  is  extreme,  the  proba- 
bility of  its  representing  actual  fact  wildly  remote;  but  the  valid- 
ity of  an  extreme  case  shows  the  impregnable  soundness  of  the 
underlying  principle;  no  doubt  whatever  that  convictions  after 
such  amendment  under  laws  passed  in  conformity  with  it  would 
be  strictly  legal.  To  make  such  convictions  actual  and  leeal 
facts,  it  is  only  necessarv  to  presuppose  a  sufficient  change  in  the 
"positive  moralitv"  of  the  people,  which,  as  aforesaid,  is  the  only 
limitation  on  their  sovereign  power. 

Tn  so  far  as  written  constitutions  fix  or  crvstallize  in  definite 
form  the  "positive  morality"  of  state  or  nation  which  favors 
them,  they  are  a  real  limitation  on  the  powers  of  government 
which  they  enumerate  and  on  the  agents  to  whom  they  allot  the 
carrying  out  of  such  powers.  Tn  practical  effect,  'however,  writ- 
ten constitutions,  even  among  those  peoples  whose  officials  at- 
tempt in  measurably  eood  faith  to  keen  written  constitutional 
limitations, — do  not  draw  hard  and  fast  lines  except  about  com- 
paratively unimportant  matters,  or  those  matters  such  as  the 
duration  of  office,  the  number  and  titles  of  hieh  officials,  and  the 
like,  which  lend  themselves  readilv  to  enumeration  with  rigid 
and  formal  description.  That  line,  for  instance,  in  the  Constitu- 
tion of  the  United  States,  Divine  to  the  federal  courts  iuris- 
diction  "  of  controversies  *  *  between  citizens  of  the  same 
state  claiming  lands  under  grants  of  different  states"  has  given 
birth  to  only  a  few  cases  and  in  these  from  the  nature  of  the  sub- 
ject, the  line  quoted  has  been  given  its  plain  literal  meaning. 
— a  statement  to  be  made  sparinp-1v  pn^  with  great  caution  of 
any  other  line  in  the  Constitution  th^t  h-s  had  to  run  the  gaunt- 
let of  "construction."  But  no  constitution  can  succeed  in  crvs- 
tallizing  into  the  definite  form  of  its  own  letter  the  "positive 
morality"  of  state  or  nation  on  and  alone  those  points  where  the 
constitution  has  no  responsive  or  correspondine  sentiment 
among  the  people;  or,  should  the  letter  so  survive,  it  will  take 


82  HERTIG     ON     TAXATION. 

on  a  meaning  contrary  to  that  intended  by  the  framers.     The 
Constitution  of  the  United  States  intended  that  the  body  of  its' 
presidential^  electors  should  elect  to  the  office  of  president  the 
man  of  their  free  and  previously  unpledged  and  undetermined 
choice ;  the  people  made  the  Constitution  afterwards  intend  that 
the  electors  should  vote  only    for    the    man  or  men  predeter- 
mined by  the  people  before  choosing  said  electors;  and  this  sub- 
sequently acquired  meaning  of  the  Constitution  has  been  carried 
into  effect  by  "positive  morality"  in  Austin's  sense,  with  a  rigor 
almost  unknown  in  the  carrying  out  of  other  sections  of  that 
justly  celebrated  instrument.     The  "positive  morality"  of  con- 
gress, of  executive  department  and  of  judiciary,  may,  and  often 
does,  widely  depart  from  book-made  ethics;  but  in  it  lie  the  im- 
mediate and  pressing  constitutional  limitations  that  determine 
the  scope  and  character  of  the  government  at  Washington ;  such 
limitations  lie  only  remotely  and  mediately  in  the  letter  of  the 
Constitution.     The  "positive  morality"  of  James  Buchanan  and 
his  cabinet  was  not  adequate  to  the  constitutional  coercing  of  se- 
ceded states;  that  of  Lincoln  and  his  cabinet  entirely  so — espec- 
ially as  reinforced  by  the  responsive  echo  from  the  people  of  the 
North  of  that  stirring  dictum,  "whenever  you  hear  a  man  prating 
about  the  Constitution,  spot  him;  for  he's  a  traitor."     Even  in 
our  not  completely  representative  government  there  is  a  consid- 
erable  correspondence,  though  formal  rather  than  hearty,  be- 
tween the  "positive  morality"  of  the  official  class  and  that  of 
their  constituents.    The  "positive  morality"  of  the  legal  profes- 
sion, from  which  all  judges,  many  legislators,  and  not  a  few  exec- 
utive officers  are  chosen,  is  proximately  the  determining  factor 
in  American  constitutional  law.     As  applied  to  such  law,  this 
"morality,"  when  divorced  from  the  transient  .heat  of  the  advo- 
cate, consists  of  a  sincere,  though  very  loosely  effective,  allegi- 
ance to  technical  canons  of  construction,  and  of  imitative  admira- 
tion for  the  opinions  of  the  judges  most  celebrated  for  constitu- 
tional interpretation.     The  number  and  magnitude,   frequently 
the  novelty,  of  questions  in  constitutional    law  that  keep  aris- 
ing; the  intimate  connectipn  between  these  and  the  issues  of 
partisan  politics;  their  broad  and  yet  close  correlation  with  his- 
tory,  economics   and   special    problems     in   civil   polity — cause 
the  lawyer  class  to  hold  more  varied  and  flexible  opinions  on 
constitutional  law  than  on  any  other  branch  of  jurisprudence, 
cause  lawyers  to  be  more  responsive  to  non-professional  fact 
and    sentiment   touching   constitutional   law   than   they   are    in 
other  matters,  or  perhaps  than  they  are  generally  aware  of.     We 
have  only  to  suppose  in 'the  political  field  a  commanding  person- 
ality embodying  the  tendencies  of  these  times,  speaking  on  ques- 


HERTIG    ON     TAXATION.  83 

tions  of  jurisprudence  with  the  authority  that  follows  accurate 
knowledge,  and  thus  creating  a  school  responsive  to  his  person- 
ality and  his  doctrines — have  only  to  make  such  supposition  and 
follow  it  with  very  moderate  constructive  imagination,  to  per- 
ceive that  our  constitutional  law,  too,  "is  positive  morality  mere- 
ly, or  is  enforced  merely  by  moral  sanctions;"  to  perceive,  also, 
that  the  effective  range  of  power  deposited  within  limits  whose 
conceded  elasticity  has  practically  an  unnamable  potential,  is 
little  affected  by  the  fact,  if  it  be  a  fact,  that  the  theory  behind 
such  power  "is  opposed  to  the  deposit  of  unlimited  power  any- 
where." 

As  I  have  necessarily  mentioned  the  police  power  (pp.  59,  09, 
70,  71,  above),  it  will  be  better  to  use  it,  rather  than  another  sub- 
division of  positive  morality  and  positive  law,  as  a  convenient 
illustration  of  the  great  flexibility  and  variety  of  opinion  amongst 
judges  and  lawyers  in  a  matter  closely  bound  up  with  constitu- 
tional law.  It  would  be  easy  to  multiply  "authorities,"  but  I 
limit  myself  to  four: 

"The  police  power  of  the  state  extends  to  the  protection  of 
the  lives,  limbs,  health,  comfort  and  quiet  of  all  persons  and 
property  within  the  state." — Thorpe  v.  Rutland  *  *  R.  R. 

Co.,  27  Vt.  150. 

"The  reasonable  limits  of  the  exercise  of  such  power,  it  is 
not  easy  to  define." — Butler  v.  Chambers,  36  Minn.  71. 

"The  police  power  is  an  unknown  quantity, — an  intangible, 
undefinable  something  supposed  to  reside  in  sovereignty  and  to 
justify  legislatures  in  enacting  and  courts  in  sustaining  uncon- 
stitutional laws." — J.  F.  (now  Judge)  McGee,  of  Minneapolis,  in 
the  freedom  of  a  brief. 

"Police  power  is  the  refuge  of  cowardly  judges,  in  times  of 
great  popular  excitement." — Justice  Brewer,  of  the  federal  su- 
preme court,  in  the  freedom  of  a  lecture. 


CHAPTER  VII. 


Summary  of  points  and  hint  of  other  methods — What  taxes  are  in  then- 
inmost  being— Taxation  has  no  formal  limit— Its  substantial  limit  the 
quantity  of  takable  wealth  at  a  given  time— Its  moral  limit  the  effective 
resistance  to  such  taking— The  case  of  Wisconsin  in  that  behalf— Dash- 
ing personality  of  Gov.  La  Follette — Fees  and  special  assessments,  with 
criticism  therein  of  Profs.  Adams  and  Seligman— Important  questions 
relating  to  public  revenues  from  other  sources  than  taxes — The  Tobacco 
monopoly  of  France  as  an  enormous  state  industry,  and  particulars  as 
to  the  same — Important  difference  between  revenue  standpoint  here  and 
in  Europe — Difference  in  American  tax  systems  great,  but  less  important 
than  they  seem  at  first  glance — Exasperation  as  a  working  factor  in 
American  tax  reform  movements. 


Vve  have  now  passed  in  review  taxation  from  the  standpoint 
of  result  and  conscious  intent;  have  studiously  refrained,  bar 
occasional  illustrative  or  cautionary  reference,  from  carrying  the 
subject  outside  its  more  modern,  and  especially  its  American, 
bearings;  have  critically  shown  the  nature  of  taxation  and  taxes, 
as  displayed  by  their  formal  side  and  by  definitions  looking  to- 
ward that  side;  have  cited,  analyzed,  amplified  and  criticized 
several  such  definitions;  have  pointed  out  the  intimate  relation 
between  taxation,  as  a  formally  unlimited  power  of  government, 
and'the  formally  unlimited  purposes  of  government, — with  pass- 
ing illustrative  notice,  of  divers  incorrect  notions  of  the  para- 
mount ends  and  final  limitations  of  government  and  its  powers; 
have  touched  upon  the  close  relation  of  practical  taxation  to 
actual  jurisprudence, — incidentally  noticing  therein  the  tendency 
of  our  judges  to  sustain  the  taxing  power  in  its  alleged  and  its 
real  conflicts  with  the  letter  of  constitutions;  have  seen  that 
written,  as  well  as  unwritten,  constitutional  guarantees  and  limi- 
tations are  practically  and  proximately  mainly  a  reflex  of  the 
"positive  morality"  of  the  legal  profession,  which  morality  has 
an  enormous  coefficient  of  flexibility,  but  that,  on  final  analysis, 
these  guarantees  and  limitations  are  determined  and  enforced 


HERTIG     ON     TAXATION.  85 

by  the  collective  conscience  of  an  actual,  or  of  an  about-to-be- 
come effective  majority, — are  determined  and  enforced  from  and 
by  moral  sanctions  only,  using  "moral"  in  a  much  wider  sense 
than  its  popular  one,  which  coincides  very  nearly  with  the  nar- 
rower sense  of  "moral"  in  doctrinaire  ethics.  Desiring  to  reach 
a  constituency  of  readers  who  move  in  the  current  of  American 
taxation,  for  whom  the  individual  features  and  landmarks  of  that 
current  are  the  chief,  sometimes  the  only,  tax  realities,  I  have 
necessarily  approached  the  subject  from  its  critical  side,  content 
to  sound  shoals  in  the  main  channel,  and  to  insist  that  its  land- 
marks and  other  proximate  realities  be  seen  under  proper  angle, 
—in  true  light,  and  in  truer  relation  with  some  other  realities. 
I  could  name  German  pedants  who  would  affirm  that  I  have 
begun  in  the  wrong  place,  and  gone  the  wrong  way — this  that 
the  zigzags  of  Hegelian  dialectic  ought  to  have  marked  the 
route ;  that  that  I  ought  to  have  laid  a  deep  and  wide  foundation 
built  of  the  principles  of  political  economy  well  laid  in  German 
mortar,  and  thereupon  have  gone  ahead,  if  at  all.  Despite  these 
authorities,  I  prefer  my  own  way;  perhaps  other  time  and  place 
will  prompt  me  to  say  what  I  think  of  theirs. 

What  taxes  are  in  form,  the  foregoing  definitions  have  tried 
to  tell  us;  what  they  are  in  essence,  or  substance,  remains  to  be 
told.  Taxes,  then,  are  that  portion  of  wealth  which  government 
lakes  forcibly,  and  of  which  it  effects  a  redistribution  through 
channels  of  its  own.  The  portion  so  taken  is  indeterminate,  sub- 
ject to  wide  quantitative  variation,  and  incapable  of  formal  limi- 
tation. It  may  be  a  small  percentage  of  the  aggregate  wealth  of 
a  given  country ;  it  must,  as  its  maximum,  leave  at  least  some 
personal  belongings  and  the  bare  means  of  subsistence;  it  may 
be  levied  on  a  plan  looking  to  uniformity  in  what  is  left  rather 
than  to  uniformity  in  the  percentage.  Hence  in  defining  taxes 
according  to  their  essence,  "portion  of  wealth"  without  word  of 
limitation  is  properly  descriptive  of  what  is  taken,  since  all  can- 
not be  taken,  and  any  portion,  from  a  little  to  nearly  the  whole, 
may  be  taken.  "Forcibly"  must  be  allowed;  we  passed  it  as 
descriptive  of  tax-taking  in  a  formal  sense ;  and  it  is  equally  ap- 
propriate to  tax-taking  in  a  substantial  sense.  A  distribution  of 
wealth  is  effected  outside  the  direct  agency  of  government. 
That  government  has  permitted  or  even  connived  at  such 
distribution,  does  not  unfit  the  same  for  serving  as  implied 
antithesis  to  the  "redistribution"  effected  by  government 
"through  channels  of  its  own."  There  is,  then,  neither  im- 
propriety nor  ambiguity  in  using  "redistribution";  and  whether 
little  or  much  be  taken  it  is  alike  applicable.  The  re- 
distribution may  be  for  use  or  for  ownership  in  any  of  the  senses 


80 


HERTIG    ON    TAXATION. 


ot  those  words;  hence  the  word  itself  sufficiently  connotes  the 
end  of  the  redistribution.  Is  there  objection  to  "channels  of  its 
own,"  because  government  channels  are  often  imposed,  deter- 
mined and  otherwise  limited  by  exterior  circumstance  or  even 
by  duress?  As  well  say  that  my  eyes  are  not  mine  because  I  had 
no  agency  in  making  them  blue;  or  that  somebody's  wife  is  not 
his,  because  he  would  willingly  divorce  her  but  cannot. 

Taxation  in  itself,  as  viewed  from  its  formal  side,  has  no  limit; 
and  we  have  just  seen  that  from  its  substantial  side  its  only  limit 
is  the  quantity  of  takable  wealth  within  a  given  country  at  a 
given  time, — "takable,"  in  the  sense  here  used,  comprising  all 
except  the  scant  residuum  of  personal  belongings  and  means  of 
subsistence  that  cannot  be  taken,  as  explained  in  the  preceding 
paragraph.  If  I  have  not  quite  "pinched  into  pilulous  smallness" 
those  formal  limitations  on  the  taxing  power  which  have  been 
set  up  by  constitutions  and  maintained  by  courts,  those  who  have 
followed  my  analysis,  or  critically  the  courae  of  American 
jurisprudence,  will  admit  that  the  practical  scope  and  effect  of 
such  limitations  are  generally  overrated.  The  goal  to  which  the 
ways  of  taxation  lead  depends  on  the  statesmanship  which  sur- 
veys them.  Wide  open  in  substance,  these  ways  will  present 
no  unyielding  formal  obstacles  to  who  shall  attempt  thereby  to 
reach  the  right  goal. 

As  intimated  above,  p.  62,  the  real  limitation  on  the 
taxing  power,  whenever  it  would  step  beyond  its  routine  exer- 
cise in  purpose,  and  kind,  lies  in  the  opposition  exerted  by  those 
who  believe  that  the  taking  of  such  step  will  adversely  affect  their 
interests.  Instances  that  may  be  cited  from  the  current  history 
of  Wisconsin  lend  warm  color  to  this  proposition.  In  that  state 
there  has  been  for  some  years  a  pronounced  feeling  with  many 
of  the  people  that  public  service  corporations,  including  the 
steam  railroads,  "pay  relatively  less  taxes  than  other  persons, 
and  [by  reason  of  paying  on  the  earnings  or  mileage  basis]  less 
than  they  would  pay  on  a  basis  of  value"  [that  is,  than  they  would 
pay  if  assessed  on  other  property  and  taxed  at  the  current  rate 
on  such  valuation.]  The  first  tax  commission  of  Wisconsin  so 
reported  to  the  legislature  in  1898.  Later  in  that  year,  the  Re- 
publicans put  into  their  state  platform  this  plank:  "We  de- 
mand the  immediate  enactment  of  such  laws  as  may  be  neces- 
sary to  compel  all  persons  and  corporations  engaged  in  business 
within  the  state  *  *  *  *  *  to  contribute  their  part  and 
equal  share  towards  the  burden  of  taxation."  In  1899  the  legis- 
lature appointed  another  tax  commission;  and  in  the  polemic 
literature  of  the  state,  it  is  said  that  the  railway  companies 
promised  prior  to  the  creation  of  said  commission,  that  if  it 


HERTIG    ON    TAXATION.  87 

should  be  created,  "and  all  other  legislative  action  postponed  ai 
hat  session,  and  [if]  the  commission  should  come  to  the  con- 
clusion that  the  taxes  of  the  railway  companies  should  be  increased 
and  so  recommend  to  the  next  legislature,  there  would  be  no 
further  opposition  on  their  part."— I.  L.  LENROOT,  in  Milwaukee 
The  commission  went  to  work  and  there  was  a  truce 
until  the  legislative  session  of  1901,  immediately  prior  to  wb'ch 
the  commission  made  its  report  and  its  recommendations  for 
amending  the  Wisconsin  tax  laws.  Meanwhile,  the  Republicans 
in  their  state  platform  for  1900  declared  their  expectation  of 
clinching  the  work  of  the  commission  with  such  legislation  as 
should  be  necessary  "to  compel  each  individual  and  every  cor- 
poration transacting  business  within  the  state — except  fraternal 
[and  other  exempted  associations] — to  bear  a  justly  proportion- 
ate share  of  the  burden  of  taxation."  To  this  plank  its  conclud- 
ing words  gave  stirring  emphasis:  "To  the  immediate  accom- 
plishment of  this  end  the  Republican  party  of  Wisconsin  stands 
pledged." 

Primary  elections  and  tax  reform  were  the  local  battle  cries 
in  the  Wisconsin  campaign  of  1900.  Robert  M.  La  Follette,  a 
dashing  and  magnetic  leader,  was  the  candidate  for  governor, 
and  into  these  state  issues  infused  abundance  of  vim  and  zeal 
— or  rather  found  them  spontaneously  responsive  to  his  own 
earnestness — among  the  Wisconsin  voters.  The  Republican  bosses 
and  their  lieutenants,  the  federal  office-holders,  had  no  love  for 
the  man  who  hoped  by  "direct  nominations  by  the  people"  to 
put  a  period  to  machine  rule  in  his  state;  and  so  they  used  the 
machine  to  "knife"  La  Follette  at  the  polls.  They  hoped  by  a 
vote  which  should  make  him  run  some  thousands  behind  the 
other  Republican  nominees  to  destroy  his  rising  prestige  as  a 
leader.  They  failed  in  their  expectation  for  the  reason  that 
"thousands  of  voters  of  other  parties  supported  La  Follette  for 
governor  because  he  stood  for  principles  in  which  they  believed." 
He  was  not  only  triumphantly  elected,  but  with  him  "a  magnifi- 
cent Republican  majority  in  the  legislature,"  pledged  not  only 
by  the  state  platform,  "but  by  their  assemblv  and  senatorial  con- 
ventions as  well,"  to  redeem  the  party  promise  for  reform  taxa- 
tion. 

The  tax  commission  presented  its  report  and  two  drafts  of 
amendments  to  the  tax  laws.  To  increase  the  annual  taxes  on 
railways  by  about  $600,000,  and  on  street  railways  and  some 
other  public  service  corporations  by  about  $150,000,  was  the  aim, 
which,  if  reached,  it  was  thought  would  make  taxes  reasonably 
uniform  as  between  the  public  service  corporations  and  the  other 
taxpayers  of  the  state.  The  legislature  was  given  its  choice  as 


HERTIG    ON    TAXATION. 

between  the  two  bills  whether  under  the  wide-open  constitution 
of  Wisconsin  it  would  continue  with  a  higher  percentage  the 
gross-earnings  tax  on  public  service  corporations,  or  drop  the 
gross-earnings  tax  and  adopt  in  lieu  thereof  an  ad  valorem  taxa- 
tion. The  governor  was  in  earnest,  but  his  reform  legislature 
declined  to  follow  his  and  the  people's  lead.  Again  I  quote 
Lenroot: 

"From  the  first  day  of  the  session  the  railroad  lobbyists  were 
on  the  ground  in  force,  offering  courtesies  and  entertainments 
of  various  kinds  to  the  members.  Bribery  is  a  hard  word,  a 
charge,  which  never  should  be  made  unless  it  can  be  substanti- 
ated. The  writer  has  no  personal  knowledge  of  money  being 
actually  offered  or  received  for  votes  against  the  bill.  It  was, 
however,  generally  understood  in  the  assembly  that  any  member 
favoring  the  bill  could  better  his  financial  condition  if  he  was 
willing  to  vote  against  it.  Members  were  approached  by  repre- 
sentatives of  the  companies  and  offered  lucrative  positions.  This 
may  not  have  been  done  with  any  idea  of  influencing  votes.  The 
reader  will  draw  his  own  conclusions.  It  was  a  matter  of  com- 
mon knowledge  that  railroad  mileage  could  be  procured  if  a 
member  was  'right.'  Railroad  lands  could  be  purchased  very 
cheaply  by  members  of  the  legislature.  It  was  said  if  a  member 
would  get  into  a  poker  game  with  a  lobbyist  the  member  was 
sure  to  win.  Members  opposed  to  Gov.  La  Follette  were  urged 
to  Vote  against  the  bill  because  he  wanted  it  to  pass.  A  promi- 
nent member  stated  that  he  did  not  dare  to  vote  for  the  bill, 
because  he  was  at  the  mercy  of  the  railroad  companies,  and  he 
was  afraid  they  would  ruin  his  business  by  advancing  his  rates, 
if  he  voted  for  it.  Such  were  a  few  of  the  methods  employed 
to  defeat  the  bill."  [Defeated  in  the  assembly,  or  lower  house,  by 
39  ayes  and  50  nays ;  on  motion  to  reconsider,  by  40  ayes  and  50 
nays, — disaffected  and  pledge-violating  Republicans  having  been 
joined  "by  the  nearly  solid  Democratic  minority."] 

The  state  platform  of  the  Wisconsin  Republicans  for  1902 
again  declares  for  "an  equal  and  uniform  taxation  of  all  taxable 
property"  and  for  direct  nominations  to  office  by  the  people. 
Again  Gov.  La  Follette,  after  a  warm  but  by  no  means  close  con- 
test, has  been  nominated  for  governor,  and  in  an  intensely 
earnest  speech  of  acceptance  insists  that  platform  pledges  must 
be  kept,  "if  political  parties  are  to  be  maintained."  The  reader, 
bearing  in  mind  that  these  illustrations  from  current  Wisconsin 
history  are  merely  in  support  of  the  proposition  that  the  real 
effective  limitation  on  the  taxing  power  is  found  in  the  opposi- 
tion exerted  by  those  whose  interests  are  adversely  affected  by 
the  proposed  exercise  of  that  power, — will  find  an  appropriate 


HERTIG     ON     TAXATION.  89 

close  and  climax  to  this  illustration  of  my  proposition  in  the  fol- 
lowing passage  from  La  Follette's  same  speech  of  acceptance: 

"The  greatest  danger  menacing  Republican  institutions  to- 
day is  the  overbalancing  control  of  city,  state  and  national  leg- 
islatures by  the  wealth  and  power  of  public  service  corporations. 
This  is  not  more  marked  with  one  political  party  than  another. 
It  deals  with  public  officials.  It  makes  no  political  distinctions. 
It  cannot  be  cured  by  denunciation.  It  cannot  be  defended  by  the 
cry  of  'purist,'  or  'populist,'  or  'demagogue.'  It  goes  directly  to 
the  seat  of  government.  It  threatens  to  sap  the  life  of  American 
citizenship.  The  voter  elects  the  candidate;  the  corporation  con- 
trols the  official.  It  leaves  the  citizen  the  semblance  of  power 
which  is  actually  exercised  against  him.  The  problem  presented 
is  a  momentous  one.  It  calls  for  no  appeal  to  passion  or  preju- 
dice or  fear.  It  calls  for  courage  and  patriotism  and  self-sacrifice. 
It  calls  for  solution.  Shall  the  American  people  become  servants 
instead  of  masters  of  their  boasted  national  progress  and  pros- 
perity— victims  of  the  colossal  wealth  this  free  country  has  fos- 
tered and  protected?'' 

When  it  is  added  that  the  concrete  side  of  the  Wisconsin 
tax  reform  campaign  may  be  stated  as  consisting  substantially 
in  an  attempt  to  make  the  railroads  pay,  in  lieu  of  their  present 
gross  earnings  tax  of  four  per  cent,  a  gross  earnings  tax  of  five 
and  one-half  per  cent,  or  the  equivalent  thereof  on  an  ad  valorem 
basis;  when  we  contrast  this  modicum  of  successfully  resisted 
claim  with  the  possible  maximum  of  theoretically  irresistible 
claim;  when  we  note  as  coming  from  tax  reform  source  the  state- 
ment of  Wisconsin  conditions  that  "last  winter  [1901]  the  repre- 
sentatives of  the  railroads  made  their  boasts  in  hotel  corridors 
that  no  legislation  could  be  passed  of  which  they  did  not  approve, 
and  that  for  a  period  of  sixteen  years  no  legislation  opposed  to 
the  interests  which  they  represented  had  been  passed," — the 
strength  of  what  I  have  above  called  "the  real  effective  limitation 
on  the  taxing  power"  shows  forth  sinister  and  formidable,  strip- 
ped of  all  disguise  that  might  else  mislead  as  to  purpose  and 
compass.  Thus  stripped,  it  accents  the  proposition  suggested  by 
Gov.  La  Follette's  own  words,  a  proposition  which  he  perhaps 
has  not  yet  consciously  entertained — that  the  present  system  of 
legislative  discretion,  legislative  irresponsibility,  and  legislative 
finality  is  inadequate  to  cope  with  the  present  urgencies  of  gov- 
ernment. 

The  preceding  paragraph  affords  a  good  example  of  those 
nearly  related  and  collateral  problems,  of  equal  or  greater  weight, 
into  which  the  immediate  problems  of  taxation  revolve.  Even 
nearer  to  taxation  proper,  and  yet  beyond  the  scope  of  this  book 


90  HERTIG    ON    TAXATION. 

is  the  large  field  of  state  revenues  mentioned  in  the  preface, 
and  not  at  all  or  remotely  growing  out  of  taxation.  Moreover, 
the  use  and  routine  administration  of  state  revenues,  state  book- 
keeping and  the  like  are  highly  interesting  and  important  and 
hardly  to  be  divorced  in  thought  from  taxation  itself.  To  use 
is  twin  to  acquire;  and  when  the  acquired  and  the  used  are 
taxes,  ^  the  using  presents  at  least  as  many  occasions  as  the 
acquiring  for  the  exercise  of  discretion,  justice  and  the  other 
qualities  of  expert  statecraft.  These  references  to  contiguous 
questions  whose  lead  I  may  not  further  pursue,  or  whose  men- 
tion I  close  with  a  sweeping  proposition — will  tend,  it  is  hoped, 
to  balance  the  reader's  attention,  and  to  prevent  the  attaching  of 
undue  importance  to  any  one  phase  of  state  finance. 

Taxes  in  the  American  states  are  so  preponderant  as  the 
-source  of  state  revenues,  that  naturally  other  sources  are  little 
mentioned  and  little  heeded.  Fees,  for  instance,  which  I  men- 
tion and  incidentally  define  in  the  preface,  which  in  Bavaria 
rather  more  than  support  the  administration  of  justice,  which 
some  foreign  writers  extend  to  the  taking  in  of  license  charges 
and  even  of  stamp  duties,  are  with  us  so  relatively  unimportant 
that  1  dare  say  not  one  voter  in  five  hundred  and  not  one  legis- 
lator in  fifty  even  thinks  of  them  in  relation  to  taxes.  We  have 
no  state  railways,  as  in  Germany,  Italy  and  Russia;  no  large 
state-managed  industry  like  the  tobacco  monopoly  in  France. 
To  return  again  to  "fees,"  they  have  been  so  looked  upon  in 
England  and  here  as  primarily  individual  perquisites  that  that 
notion  of  them  seems  still  to  be  the  prevailing  one,  though  in  the 
United  States  in  passing  through  the  stage  of  extreme  individu- 
alism, we  have  seen  fees  of  office  gradually  cease  to  be  the  pri- 
vate gain  of  the  officer,  who  is  now  in  most  cases  put  on  salary 
and  made  to  pay  his  fees  into  the  proper  treasury.  In  English 
and  American  law  the  notion  of  fees  is  still  individualist.  A  fee 
is  a  sum  of  money  paid  to  a  person  for  a  service  done  him  by 
another. — Blow  v.  Huston,  28  English  Law  and  Equity,  360. 
Costs  allotted  by  a  court  to  the  successful  party  litigant  are  not 
technically  fees,  but  are  incident  to  the  judgment  in  his  favor. 
They  are  for  expenses  incurred  about  his  suit — usually  an  ag- 
gregate of  fees  proper  already  paid  by  him  plus  a  "docket  fee"  and 
other  items  that  are  not  fees  in  any  proper  sense  of  the  word. 
The  Alabama  court  in  so  distinguishing  costs  defined  fees  as 
"compensations  to  public  officers  for  services  rendered  individu- 
als in  the  progress  of  the  cause,  or  (in  another  aspect)  not  in 
the  course  of  litigation." — Tillnian  v.  Wood,  53  Ala.  578.  Pro- 
fessor H.  C.  Adams,  in  departing  from  the  simpler  notion  of 
fees,  in  wedding  them  to  professorial  ideals,  and  I  may  add  pro- 


HERTIG    ON    TAXATION.  91 

fessorial  jargon  contrives  to  be  very  edifying  a  rebours,  if  I  may 
say  so. 

"A  fee,"  says  he,  "is  a  payment  made  to  the  state  on  the  oc- 
casion of  some  specific  service  rendered  by  the  state  to  the  citi- 
zen, the  service,  however,  being  non-commercial  in  char- 
acter. Two  or  three  illustrations  will  make  this  clear.  The  pay- 
ment demanded  for  recording  a  deed  or  mortgage,  or  for  any 
legal  process,  is  a  fee;  so  also  is  the  payment  required  to  secure 
a  passport  or  license  (this  latter,  however,  should  not  be  con- 
founded with  a  license  tax),  or  for  the  issue  of  a  teacher's  certifi- 
cate or  diploma;  so  also  is  the  payment  for  connecting  with  a 
public  sewer  or  for  the  privilege  of  purchasing  light  and  water 
from  a  municipality.  All  these  payments  and  many  others  for 
like  services,  or  permits,  are  called  fees."  Fairly  good,  profes- 
sor; but  though  the  distinction  that  fees  are  "non-commercial  in 
character"  is  convenient  enough  to  mark  broadly  the  difference 
between  the  charges  made  by  a  state  for  tolls  on  its  canals  or 
railroads  and  the  charges  ordinarily  grouped  as  "fees,"  yet  in 
many  cases,  "non-commercial"  is  too  absolute  for  the  propei 
description  of  fees.  If  I  employ  a  notary  to  protest  a  bill  of 
exchange,  he  renders  me  commercial  service;  and  though  ordi- 
narily the  state  is  not  in  any  sense  a  party  to  such  transaction, 
yet  it  would  be  entirely  competent  for  the  state  to  put  all  notaries 
on  its  payroll,  and  cover  their  fees  into  the  state  treasury.  So,  if  I 
bring  suit  on  such  bill,  I  may  in  many  states  employ  a  private 
person  to  make  service  of  the  summons,  and  any  such  person 
renders  me  a  commercial  service.  If  I  choose  for  such  service 
to  employ  a  sheriff  and  pay  him  a  fee  fixed  by  law,  and  which 
he  is  obliged  to  cover  into  the  county  treasury,  is  the  service  ren- 
dered any  the  less  commercial?  Continuing,  the  professor  be- 
comes still  more  absolute:  "They  [fees]  are,  however,  in  no  sense 
the  price  paid  for  the  service  rendered  or  the  permit  granted. 
While  it  is  true  that  they  recognize  a  specialization  in  the  service, 
they  are  in  no  sense  a  quid  pro  quo.  The  amount  fixed  bears 
no  relation  to  the  importance  of  the  service,  and  only  in  a  few 
cases  to  the  quantity  or  the  quality  of  the  service.  For  the  most 
part,  services  which  are  made  the  occasion  of  a  fee  do  not  per- 
mit of  quantitative  assessment;  nor  is  the  purpose  of  the  govern- 
ment in  demanding  a  fee  that  the  aggregate  of  moneys  thus 
secured  shall  equal  the  expenditure  incident  to  the  service. 
*  *  *  *  A  fee  is  more  properly  classed  under  the  head 
of  derivative  than  of  direct  revenue;  that  is  to  say,  it  is  allied  to 
a  tax  and  not  to  a  price.  Although  paid  on  the  occasion  of  a 
special  service,  it  is  not  paid  because  of  that  service,  (!)  but 
rather  because  the  government  selects  a  certain  occasion  in  the 


92  HERTIG  ON  TAXATION. 

performance  of  its  general  functions  for  the  levy  of  a  special 
tax,  and  levies  that  tax  to  the  individual  with  whom  at  the  time 
it  comes  in  contact."— HENRY  CARTER  ADAMS,  Ph.  D.,  LL.  D., 
in  The  Science  of  Finance,  (New  York,  1898).  It  would  be  diffi- 
cult, even  in  competition  and  of  set  purpose,  to  pack  more  false 
fact,  so  to  speak,  and  more  false  theory,  still  wearing  an  appear- 
ance of  good  faith,  into  the  same  compass — than  Prof.  Adams 
has  contrived  to  put  into  the  lines  last  quoted.  Fees  -'in  no 
sense  the  price  paid  for  the  service  rendered!"  O  monstrous 
perversion  of  plainest  fact,  and  made  merely  to  be  able  to  say 
without  the  qualification  of  "often"  or  "generally"  that  a  fee  "is 
allied  to  a  tax  and  not  to  a  price!"  Professor  G.  T.  Ladd  of 
Yale  laments  "the  degradation  of  the  professorial  office;"  sees 
professorial  decadence  in  the  decadence  of  the  times;  professors 
honeycombed  with  materialism  losing  their  spirituality  and  with 
it  their  force,  as  with  his  hair  Sampson  his.  And  yet  I  fail  to  see 
why  the  loss  by  Prof.  Adams  of  his  spirituality,  if  he  has  lost  it, 
should  have  made  him  so  grossly  negligent  in  the  matter  of  fees: 
marshalls,  clerks,  sheriffs,  justices  of  the  peace  and  constables 
are  proverbially  keen  in  that  behalf;  and  I  much  doubt  if  the  sad 
and  serious  editor  of  the  Atlantic  Monthly  would  think  an  article 
on  their  spirituality  at  all  suited  to  his  readers.  However,  I  leave 
these  collateral  questions  open,  and,  returning  to  the  nature  of 
fees,  point  to  the  fee  system  in  courts  of  justices  of  the  peace 
as  evidence  that  there  at  least  fees  are  in  every  sense  the  price 
paid  for  services  rendered.  Moreover,  in  many  places  justice 
courts  are  a  very  active  branch  of  the  police  power.  In  some 
places,  they  have  criminal  jurisdiction  with  no  allowance  what- 
ever from  the  state  or  municipality.  They  keep  the  fees  and 
costs,  and  pay  over  fines  collected  into  the  proper  treasury. 
There  this  system  is  entirely  self-sustaining  for  both  justice  and 
constable;  and  manifestly  ft  is  the  purpose  of  the  government 
"that  the  aggregate  of  moneys  thus  secured"  shall  make  the 
system  self-sustaining,  and  sufficiently  remunerative  to  incum- 
bents to  keep  the  offices  filled.  A  curious  chapter  could  be  writ- 
ten on  the  quantitative  and  other  relations  between  the  quantum 
of  fees  and  the  service  rendered.  Often  the  relation  is  purely 
quantitative  as  in  fees  fixed  by  law  for  making  .records  and  issu- 
ing copies  of  the  same.  Here  there  can  be  of  course  no  grada- 
tion of  price  according  to  the  real  importance  of  the  transaction. 
Often  the  relation  is  dubiously  quantitative,  or  quantitative  in 
theory,  as  in  the  taxation  of  costs,  leading  to  downright  robbery 
by  the  taxing  officers.  This  abuse,  for  special  instance,  attained 
such  mammoth  proportions  in  Illinois,  that  court  costs  were 
put  upon  a  fixed  and  equal  basis  of  so  much  for  the  plaintiff  in 


HERTIG  ON  TAXATION.  98 

each  case,  so  much  for  each  defendant  separately  appearing.  The 
"purpose"  of  government  does  not  lend  itself  to  rigid  doctrinaire 
expression:  it  is  capable  of  great  flexibility  as  well  in  its  attitude 
toward  fees  as  toward  anything  else  within  its  scope.  There  is 
nothing  in  the  nature  of  the  subject  to  hinder  government  from 
being  impudently  exacting,  grasping  and  revenue-seeking  in  de- 
manding fees;  and,  as  a  matter  of  fact,  government  has  often 
been  fully  level  with  the  measure  of  its  opportunities.  The  fees 
formerly  exacted  in  England,  so  roundly  and  soundly  denounced 
by  Bentham,  afford  sufficient  proof  in  this  behalf,  and  will  be 
mentioned  more  at  length  in  a  subsequent  chapter.  The  sent- 
ence last  quoted  from  Adams  (pp.  91-2,  above),  "although  paid 
on  the  occasion,"  etc.,  should  be  marked  and  remembered  by 
every  student  and  every  thoughtful  reader  as  setting  forth  a  typi- 
cally awkward  sophism, — perennial  example  for  one's  self  to 
avoid,  but  good  to  quote  in  the  heat  of  debate  under  the  intro- 
ductory formula,  "that  reminds  me." 

Special  assessments,  as  for  opening  streets,  paving,  curbing, 
building  sewers  and  the  like  are  intermediate  between  fees  and 
taxes  in  the  stricter  sense  of  the  latter  word.  There  is  a  special 
benefit  to  the  payor,  as  in  the  case  of  him  who  pays  fees,  and  a 
general  benefit,  as  from  taxes  proper,  to  the  community  which 
uses  the  street  or  other  improvement  on  which  the  special  as- 
sessments are  expended.  Fees,  in  many  cases,  cannot  be  con- 
sidered as  other  than  strictly  voluntary  payments;  special  as- 
sessments, in  most  cases,  cannot  be  considered,  when  collected, 
as  other  than  compulsory  payments  like  taxes.  Even  where  the 
foundation  of  a  special  assessment  is  the  petition  of  a  part  of  the 
abutting  owners,  the  payments  themselves  are  for  some  owners 
compulsory.  Special  assessments,  too,  like  taxes,  are  often  con- 
fiscatory,  as  where  a  street,  with  a  "job"  in  it,  is  unnecesarily 
opened  along  surburban  lots.  Many  an  owner  has  "dropped" 
many  a  lot  because  of  special  assessments, — directly  by  choosing 
not  to  pay  them  at  all,  indirectly  by  paying  them,  only  to  go 
broke,  get  discouraged  and  let  go  a  little  later.  Important  in 
municipal  finance,  and  in  their  technical  legal  side,  special  assess- 
ments in  detailed  treatment  do  not  fall  within  the  scope  of  this 
book.  The  excellent  monograph  of  Dr.  Victor  Rosewater,  edi- 
tor of  the  Omaha  Bee,  may  be  consulted  with  advantage.  It  is 
entitled  Special  Assessments:  a-  Study  in  Municipal  Finance,  and 
came  out  as  Vol.  II.,  No.  3  of  the  Columbia  College  Studies  in 
History,  Ecwiomics  and  Public  Lair.  Seligman  in  the  few  pages 
he  gives  to  the  subject  in  his  Essays  in  Taxation,  is  as  always,  in- 
teresting and  enlightening.  I  cannot,  however,  exempt  him 
from  the  usual  professorial  lapse — a  sliding  into  absolutism.  He 


94  HERTIG  ON  TAXATION. 

says  (p.  291),  "there  is  no  truth  in  the  statement  that  a  fee  is 
voluntary  and  a  special  assessment  compulsory."  I  might  be 
with  him  if  he  were  to  plant  himself  on  the  ancient  .dictum, 
"Whatever  happens  necessarily  happens,"  but  cannot  suffer  him 
to  knock  out  firm  modern  "voluntary"  with  loose  modern  in- 
stance. I  see  no  use  for  the  word  voluntary  either  in  common 
speech  or  philosophical  disquisition  except  to  describe  an  act 
in  the  doing  of  which  there  is  conscious  choice  in  relation  to 
proximate  object  of  choice,  and,  sometimes,  in  relation  also  to 
more  remotely  expected  results  of  choice.  We  may  cheerfully  go 
half-way,  sometimes  the  whole  way,  to  meet  a  fee  and  pay  it; 
special  assessments  are  apt  to  steal  on  us  like  a  marauder  with  a 
club.  Fees  are  often  clearly  circumscribed  and  visible  in  our 
field  of  choice;  *  special  assessments  are  often  neither  forseen 
nor  foreseeable.  It  is  merely  wrenching  "voluntary"  out  of  its  or- 
dinary and  practical  meaning  to  deny  it  in  all  cases  to  the  act  of 
paying  fees.  Indeed,  Seligman's  argument,  strictly  taken,  and 
allowing  to  "voluntary"  a  wrenched  but  not  quite  dislocated 
meaning,  goes  to  proving  that  the  payment  both  of  fees  and  of 
special  assessments  is  rather  voluntary  than  compulsory.  It  may 
be  a  hard  choice  between  toothache  and  the  extraction  of  the 
tooth;  but  when  there  is  no  other  alternative,  and  the  patient  is 
not  under  compelling  guardianship,  the  act  of  choosing  is  his, 
and  is  surely  voluntary.  Birth  is  not  a  voluntary  act  on  the  part 
of  the  born;  but  it  may  be  a  bright  and  shining  mark  in  the  field 
of  choice  of  the  parents  who  pay  the  birth  fees.  Who  chooses 
the  office  chooses  also  its  burdens;  and  in  this  sense,  whoever 
owns  a  piece  of  land,  may  be  held  to  have  assumed  voluntarily 
its  taxes  and  special  assessments  to  be  thereafter  levied,  in  so  far 
as  he  pays  them  at  all.t 

The  direct  revenues  of  states,  revenues  which  they  do  or  may 
receive  from  rentals,  or  sales  of  state  properties,  from  the  earn- 
ings of  state  conducted  enterprises,  such  as  mines,  railroads,  mo- 


*Titles  and  their  successive  degrees  may  be  had  of  some  governments 
by  paying  high  fees.  What  one  of  the  many  payments  which  human 
vanity  consummates  with  a  glad  rush,  is,  or  can  be,  more  voluntary  than 
paying  for  a  title? 

fTo  do  full  justice  to  Seligman  and  acquit  myself  of  the  possible 
charge  of  needless  logic-chopping,  his  paragraph  is  given  at  large  in  this 
note:  "It  might  be  maintained  that  special  assessments  are  like  direct 
taxes,  and  fees  like  indirect  taxes,  in  the  sense  of  taxes  on  consumption  or 
on  acts  and  communication,  because  the  former  are  compulsory  and  the 
latter  voluntary.  But  this  distinction  is  badly  expressed,  and  really  un- 
tenable ;  for,  notwithstanding  the  contrary  statement,  which  has  fre- 
quently been  made,  indirect  taxes  are  not  a  whit  more  voluntary  than 
direct  taxes.  It  is  true  that  if  a  man  chooses  to  go  without  tobacco  he 


HERTIG  ON  TAXATION.  95 

nopolies,  etc., — are  most  interesting  for  comparison  with  tax 
revenues,  and  as  a  text  from  which  to  expound  one's  views  on 
the  theory  and  practice  of  government.  The  historical  origin 
and  legal  theory  of  the  public  domain  of  the  United  States ;  the 
large  independent  domain  of  Texas  which  remained  the  property 
of  that  state  after  her  incorporation  into  the  Union;  the  policy 
of  the  United  States  in  ceding  certain  lands  to  the  states  and  to 
corporations,  in  giving  others  to  soldiers,  and  making  still  others 
of  easy  acquirement  under  the  homestead,  pre-emption  and  tim- 
ber-culture acts ;  the  policies  of  the  several  states  with  regard  to 
their  lands, — these  different  matters  and  policies  constitute  the 
heads  for  exhaustive  study  of  the  principal  sources  of,  and  facts 
pertaining  to  direct  state  revenues  in  this  country.  But  the  Erie 
canal  in  New  York,  the  early  attempts  and  expenditures  oi 
Pennsylvania  to  provide  her  citizens  with  transportation  facili- 
ties, the  enterprise  of  the  city  of  Cincinnati  in  building  the  Cin- 
cinnati &  Southern  railroad, — open  up  for  study,  with  other  in- 
stances easy  to  mention  in  the  field  of  state  and  municipal  en- 
terprise, a  closely  related  department  of  public  finance — one  per- 
haps even  more  interesting  than  that  embracing  the  public  land 
policy  of  the  United  States  and  of  the  several  states.  All  these 
I  pass  over  as  not  within  the  direct  scope  of  this  book;  but  I 
would  have  readers  think  of  them,  and  especially  have  them  re- 
member that  the  propositions  and  conclusions  set  forth  in  this 
book  have  not  been  made  without  due  consideration  of  impor- 
tant cognate  questions. 

Because  of  its  imposing  returns,  the  ease  with  which  it  lends 
itself  to  concise  statement,  and  of  its  standing  apart  in  public 
finance,  I  cannot  forbear  to  mention  the  tobacco  monopoly  in 
France.  Established  by  Napoleon's  decree  of  Dec.  29th,  1810,* 

may  escape  the  tobacco  tax;  but  it  is  equally  true  that  if  a  man  chooses 
to  go  without  certain  kinds  of  property  or  income,  he  may  escape  to 
that  extent  the  property  tax  or  the  income  tax.  Indirect  as  well  as 
direct  taxes  are  compulsory,  not  voluntary,  contributions.  In  the  same 
way,  there  is  no  truth  in  the  statement  that  a  fee  is  voluntary  and  a 
special  assessment  compulsory.  It  is  true  that  we  do  not  need  to  pay 
a  pedler's  license  fee  if  we  do  not  care  to  peddle ;  but,  on  the  other  hand, 
we  do  not  need  to  pay  a  special  assessment  if  we  do  not  care  to  own 
the  land.  Further,  when  the  payment  of  a  fee  is  connected  with  neces- 
sary, every-day  transactions,  as  are  mortgage  registration  fees  or  mar- 
riage fees,  there  can  be  no  question  of  the  compulsory  nature  of  the 
transaction.  Birth  and  death  cannot  well  be  termed  voluntary  actions ; 
.yet  a  registration  fee  for  a  birth  or  death  certificate  does  not  differ  in 
character  from  any  other  fee.  Fees  and  special  assessments,  indirect  and 
direct  taxes,  are  all  compulsory  contributions. — Essays  in  Taxation  290-91. 
*Re-established  rather.  There  was  a  monopoly  of  tobacco  sales  under 
the  Old  Regime,  dating  from  1674,  and  lasting  with  an  interruption  of 


96 


HERTIG  ON  TAXATION. 


it  has  lasted  through  all  the  vicissitudes  of  French  government, 
surviving  the  first  empire,  the  returned  Bourbons,  the 
Orleans  regime,  Louis  Napoleon's  so-called  republic,  his  empire 
and  the  commune.  The  present  republic  approves  and  contin- 
ues it.  The  act  establishing  it,  like  any  other  long  in  force  act, 
lias  undergone  revisions  and  amendments,  but  these  have  all  left 
its  ground  features  the  same.  It  survived  even  a  government 
promise  to  abolish  it:  by  the  law  of  1852,  the  tobacco  monopoly 
was  to  expire  the  first  of  January,  1863.— LA  ROUSSK,  Grand  Dic- 
tionnaire  Unhcrscl.  It  is  a  state  conducted,  state-regulated  indus- 
try. There  are  no  private  manufacturers  of  tobacco  in  France, 
and  every  retail  dealer  is  virtually  an  officer  of  the  state.  "The 
retail  dealers  are  named  by  the  prefect  of  the  commune  where 
the  sales  amount  to  ten  thousand  francs  or  less,  and  by  the  min- 
ister of  finance  if  the  proceeds  exceed  ten  thousand  francs. 
These  permits  to  sell  are  accorded  by  preference  to  persons  to 
whom  the  state  is  in  some  way  indebted,  as  wounded  soldiers  or 
the  widows  and  daughters  of  soldiers.  In  this  manner  it  gives  to 
those  persons  suitable  occupation  and  partially  relieves  the  pen- 
sion rolls." — ADAMS,  The  Science  of  Finance,  270.  It  en- 
courages home  industry  in  a  novel  way.  The  law  provides  that 
not  less  than  one-fifteenth  (Adams)  of  the  raw  tobacco  used  shall 
be  home-grown;  but  it  has  been  found  expedient  in  practice  to 
greatly  increase  this  figure,  and  nearly  one-third  (Adams)  of  the 
whole  amount  used  is  home-grown.  An  estimate  is  made 
of  how  much  of  the  home-grown  product  can  be  conveniently 
used  in  a  year's  business  ;  and  this  is  parcelled  out  to  the  differ- 
ent tobacco-growing  districts  to  furnish,  not  as  obligatory,  but 
as  permissive.  *  *  "Any  one  who  desires  to  cultivate  this 
crop  must  give  notice  of  his  intention  to  the  maire  of  the  com- 
mune before  the  ist  of  March,  and  a  permit  will  be  granted  for 
such  cultivation ;  but  the  aggregate  of  these  permits  must  not  ex- 
ceed the  amount  apportioned  to  the  province.  The  growing  crop 
is  placed  under  careful  supervision  in  order  to  make  sure  that 
no  tobacco  is  taken  for  private  use  or  disposed  of  at  private  sale. 
The  price  to  be  paid  for  the  crop  is  determined  at  the  time  the 
assignment  for  cultivation  is  made,  so  that  the  grower  knows  be- 
fore he  plants  the  crop  the  price  he  is  to  receive.  For  the  col- 
lection of  the  crop  the  government  has  established  a  sufficient 


almost  two  years  (1719-1720)  to  the  time  of  the  Revolution.  Napoleon 
had  sometimes  a  "sweet"  way  of  dealing  with  plutocrats.  Seeing  at  a  ball 
a  woman  covered  with  diamonds,  he  asked  about  the  husband  of  the 
woman  who  could  afford  such  profusion.  They  told  him  that  her  husband 
was  a  tobacco  manufacturer.  Some  months  afterwards,  he  issued  the 
decree  of  December  29th,  1810. 


HERTIG  ON  TAXATION.  97 

number  of  warehouses,  so  that  the  grower  need  not  transport 

his  product  more  than  twenty-five  kilometers"    [15%  miles]. 

ADAMS,  269-70. 

The  manufacture  proper  is  conducted  in  "nineteen  factories," 
and  it  gives  employment  to  sixteen  or  seventeen  hundred  work- 
men." So  says  Adams;  but  I,  distrusting  instinctively  profes- 
sorial reasoning,  have  not  much  more  confidence  in  professorial 
facts.  (  After  scoring  on  the  professor  in  his  generalizations 
about  "fees,"  I  would  willingl}  have  given  him  praise  for  lucid 
statement  of  facts  by  quoting  him  without  comment,  on  the  to- 
bacco monopoly.  The  first  edition  of  the  Grand  Dictionnaire 
Universel  of  Pierre  La  Rousse  does  not  bring  its  economic  and 
other  facts  of  current  history  down  to  a  date  much  later  than 
1874.  It  says  that  the  number  of  workers  of  both  sexes  employ- 
ed "today"  [no  date]  in  the  French  tobacco  factories  is  above 
eighteen  thousand.  As  of  the  specific  date  of  December  31, 
1874,  it  says :  "In  a  total  of  17,669  registered  workers  of  both  sex- 
es, there  were  16,325  women,  while  the  number  of  men  did  not 
reach  a  tenth  of  that  figure.  A  "second  supplement"  to  this 
work  brings,  it  would  seem,  the  figures  down  to  1889.  This  sup- 
plement gives  the  number  of  tobacco  employes,  "exclusive  of  the 
engineers  of  the  national  factories,"  as  being  22,613,  embracing 
apparently  the  employes  of  the  government  who  supervise  the 
culture,  as  well  as  all  employed  in  the  manufacture  of  tobacco. 
Of  this  number,  there  were,  in  round  numbers,  2,500  men,  of 
whom  758  were  above  the  grade  of  ordinary  workmen,  and  as 
preposes  had  some  measure  of  supervision  and  authority,  while 
the  remainder  of  the  men,  1,802,  were  merely  ouvriers.  The 
female  employes  numbered  18,311, — that  is  to  say  in  preposees 
and  18,200  ouvrieres.  A  correct  statement  of  facts  is  much  hard- 
er to  find  than  an  honest  man. 

The  French  tobacco  monopoly  is  in  fact  a  government  trust, 
and  as  such  is  immensely  profitable.  The  government  caters  to 
the  taste  of  those  who  want  fancy  tobaccoes;  and  its  experts 
buy  foreign-grown  stock  to  be  worked  into  the  different  brands 
desired.  It  has  ceased  to  be  afraid  of  competition  in  quality  from 
foreign  manufacturers,  and  permits  their  sale  from  its  store- 
houses and  from  the  retail  shops.  Naturally  it  regulates  the 
price  of  both  the  home  and  the  foreign  brands ;  each  retail  dealer 
is  furnished  with  a  scale  of  prices.  The  retailer  who  sells  at  a 
higher  rate  is  prosecuted.  The  profits  to  the  government  have 
increased  enormously  over  the  figures  attained  in  the  earlier 
years  of  the  igth  century.  In  1820,  the  profits  were  not  quite  39,- 
coo,oco  francs;  in  1850,  they  were  95,625,067  francs;  in  1870, 
194,630,328  francs:  in  1889,  314,237,316  francs  or  about  sixty 


98  HERTIG  ON  TAXATION. 

million  dollars.  These  figures  of  profits  are  from  the  Nouveau 
Dictionnaire  d'  Economic  Politique,  Vol.  II.,  Paris,  1892.  Adams, 
whose  book  came  out  in  1898,  says,  but  without  giving  his  au- 
thority: "At  the  present  time  the  net  proceeds  range  between 
320,000,000  and  400,000,000  francs  a  year.  The  general  expens- 
es of  manufacture  and  sale  amount  to  about  20  per  cent  of  the 
gross  proceeds,  thus  giving  to  the  state  a  profit  of  80  per  cent 
upon  sales."  p.  270. 

The  public  finance  of  most  European  countries  is  handicap- 
ped with  the  necessity,  which  itself  grows  out  of  the  present 
political  and  economic  regime,  of  seeking  revenue  substantially 
wherever  it  may  be  found — from  every  available  source.  The 
tobacco  monopoly  now  yields  to  the  French  government  nbout 
as  much  per  head  of  population  as  were  per  capita  the  national 
expenditures  of  the  United  States  government  in  1860.  With 
31,443,000  population  the  federal  government  spent  $63,000,000 
— just  a  trifle  over  $2.00  per  head;  but  in  late  years  the  French 
government  expends  nearly  90  francs,  or  more  than  $17.00  per 
head,  and  just  at  present  is  wrestling  with  a  deficit.  Tax  reform 
movements  show  more  or  less  life  in  many  of  the  American 
states;  but  these  movements  are  from  abundance  rather  than 
from  deficits.  In  Europe  there  is  comparatively  little  complaint 
that  the  individual  escapes  his  proportionate  share  of  taxation; 
the  question  is,  What  source  of  revenue  is  escaping?  Here  the 
complaint  is  that  individuals,  and  especially  corporations,  are 
by  tax-dodging  breaking  down  or  seriously  impairing  what 
would  otherwise  be  a  satisfactory  source  of  state  revenues. — the 
general  property  tax.  The  casting  about  for  other  taxes  seems 
to  be  proportionate  to  the  feeling  that  under  the  general  prop- 
ty  tax  too  many  escape  paying  their  just  share.  With  near- 
ly 50  states  empowered  to  set  up  several  systems  of  taxation,  it 
is  small  wonder  that  there  are  many  differences  of  detail;  but  it 
is  even  more  wonderful  that  there  is  so  nearly  a  substantial  har- 
mony in  the  general  features  of  American  state  taxation.  Prof. 
Seligman's  enumeration  of  (in  the  American  states)  "no  less  than 
thirteen  important  methods  of  taxing  corporations"  is  very  strik- 
ing; some  of  these  methods  differ  very  materially  in  form  and  in 
resulting  revenue;  but  there  are  more  approximations  to  like  re- 
sult in  many  of  these  methods  than  would  at  first  be  suspected. 
It  may  be  added  that  very  good  practical  results  may  be  had 
without  following  one  and  the  same  method.  Pennsylvania  pur- 
sues various  methods;  New  Jersey  has  one  method  for  railroad 
and  canal  corporations,  and  a  different  method  for  other  corpora- 
tions. No  doubt  the  very  diversity  of  some  of  the  methods  pur- 
sued helps  to  keep  alive  certain  forms  of  tax  agitation,  it  being 


PIERTIG  ON  TAXATION.  99 

very  natural  with  human  nature  in  losing  its  conservatism  to 
conclude  that  "they  do  these  things  better  elsewhere," — a  prop- 
osition, for  the  rest,  that  is  often  true. 

But  on  the  whole,  individual  and  class  exasperation  over  real 
and  fancied  individual  and  class  escape  from  just  taxation,  is  the 
most  important  feature  of  tax  reform  movements  in  the  Ameri- 
can states.  This  exasperation  is  a  feeling  big  with  results, 
though  not  with  the  results  which  those  most  active  for  tax  re- 
form most  desire.  Moreover,  it  is  a  feeling  whose  effectiveness 
for  practical  results  is  not  to  be  measured  by  the  more  or  less  of 
abstract  justice  underlying.  What  men  earnestly  believe  is  the 
potent  factor  in  government;  what  they  ought  to  believe  is  theo- 
logical and  academic. 

As  for  me  individually  tax  questions  are  never  quite  disen- 
tangled from  contiguous  domain,  and  they  present  or  inseparably 
call  up 

1.  How  to  get  state  revenues. 

2.  How  to  expend  them. 

And  reforms  in  the  one  are  just  as  important  as  in  the  other, 
and  in  good  practice,  perhaps  I  should  say  in  advanced  civil 
practice,  are  inseparably  associated.  However,  though  the  con- 
structive side  of  both  kinds  of  reforms  is  not  unrepresented  in 
the  remainder  of  these  pages,  they  are  devoted  mainly  to  a  crit- 
ical exposition  of  how  to  get  state  revenues,  and  how  not  to  get 
them.  With  the  state  of  Minnesota,  and  tax  measures  and  en- 
deavors therein  for  main  text,  I  now  proceed  to  give  the  neces- 
sary facts  and  develop  my  commentary  thereon  according  to  its 
first  design,  to  which,  however,  these  introductory  chapters  form 
a  necessary  supplement. 


CHAPTER  VIII. 


Salient  facts  and  figures  about  Minnesota— Kaleidoscopic  changes— Rail- 
way misery  in  1890,  railway  splendor  in  1902— Lest  we  forget  that 
size  may  be  the  greater  matter  for  sighs. 


When,  in  1858,  Minnesota  was  admitted  to  the  Union,  mak- 
ing the  thirty-second  star  on  the  flag  of  the  United  States,  she 
had  already  leaped  from  a  mere  territorial  spot  on  the  census 
of  1850,  with  her  tiny  roll  there  of  6,077  inhabitants,  to  a  dignity 
that  entitled  her  in  the  mind  of  congress  to  two  representatives 
in  the  popular  branch  of  that  body  immediately  upon  her  ad- 
mission. The  census  of  1860  gave  her  172,023  inhabitants;  when 
the  first  census  of  the  United  States  was  taken,  in  1790,  but  four 
of  the  thirteen  original  states  fell  below  those  figures  in  point 
of  population, — New  Hampshire,  Rhode  Island,  Delaware,  and 
Georgia.  The  population  of  Rhode  Island  and  Delaware  taken 
together,  or  of  either  of  those  states,  and  Georgia,  did  not,  in 
1790,  equal  that  of  Minnesota  in  1860.  Roundly  speaking,  tht 
population  of  the  thirteen  original  states  in  1790  was  twenty- 
nine  times  that  of  Minnesota  in  1860.  But  with  the  lapse  of  the 
next  decade  a  mighty  change  is  wrought  in  the  basis  for  com- 
parison; in  1870  Minnesota  with  her  439,706  inhabitants,  figures 
thus  grown  despite  civil  war  and  Indian  troubles  and  terrors,  had 
surpassed  the  population  figures  of  each  of  the  thirteen  original 
states  as  given  by  the  first  census,  except  Virginia's.  Her  1790 
number  headed  that  of  Minnesota  for  1870  by  250,000,  roundly 
speaking.  Minnesota's  population  in  1880,  780,773,  was  equal 
in  number  to  one-fifth  the  aggregate  population  of  the  original 
thirteen  as  shown  by  the  first  census;  and  her  urban  population 
had  barely  made  the  beginning  of  its  present  growth.  In  1880, 
good  hotels  in  the  state  served  their  guests  almost  as  freely  with 
buffalo  hump  as  with  beef  from  the  shambles,  and  coat  of  buffalo 
skin  was  still  the  ordinary  overcoat  of  the  people, — the  "wild 
ox,"  as  Father  Hennepin  calls  the  buffalo,  being  yet  in  easy  reach, 
not  indeed  within  the  state,  but  further  West  toward  the  then 
terminus  of  the  unfinished  Northern  Pacific  railway.  In  1890, 


HERTIG  ON  TAXATION.  .  -  '•',  :  tOl 

with  1,301,826  inhabitants  in  the  state,  the  urban  element  had 
become  so  important  that  from  a  point  midway  between  St.  Paul 
and  Minneapolis,  a  radius  of  ten  miles  was  sufficient  to  circum- 
scribe a  population  double  that  of  London  in  Shakespeare's  time 
—which  central  point  was  then  still  so  rural  that  within  a  mile 
thereof,  I  saw  that  summer  a  brace  of  prairie  chickens  seemingly 
as  much  at  home  in  coy  wildness  as  their  fellows  in  the  hills  of 
the  Pembina. 

In  1890,  Minnesota's  splendid  brigand,  James  J.  Hill,  had 
been  forced,  for  lack  of  money,  to  pause  in  his  Napoleonic  dash 
for  the  Pacific  coast,  and  to  hang  up  his  unfinished  road  at  an 
obscure  point  in  Montana,,  which  threatened  for  a  while  to  prove 
his  Moscow.  The  unfinished  road,  projecting  cantilever  fashion 
over  the  wilderness  from  buttress  of  solid  fertility  in  Minnesota 
and  the  Red  River  Valley,  had  raised  the  mileage  of  the  Hill 
system  from  1,400  in  1884  and  1885  to  3,000  in  1890,  but  had 
lowered  its  brilliant  net  earnings  of  over  $3,000.00  per  mile  in 
those  two  fat  years  to  the  pitiful  figure  of  $1,627.00  per  mile  in 
1890, — a  lean  chop  out  of  which  to  cut  bonded  interest  and  divi- 
dends, to  say  nothing  of  surplus!  However,  the  traffic  of  Minne- 
sota and  of  eastern  North  Dakota  still  stood  by;  a  surplus  saved 
from  that  traffic  in  former  years  was  still  available ;  and  between 
them  Hill  was  able  to  keep  unbroken  his  record  with  financial 
friends.  There  was  no  default  in  interest  payments,  and  divi- 
dends were  still  forthcoming.  The  Great  Northern  Railway 
Company  had  just  been  born,  (or  rather  had  just  taken  that 
name  after  prior  corporate  existence  as  the  Minneapolis  and  St. 
Cloud  Railway  Company),  to  concentrate  into  one  system,  by 
lease  or  otherwise,  the  St.  Paul,  Minneapolis  and  Manitoba  sys- 
tem and  other  Hill  railroad  properties,  so  as,  it  would  seem,  to 
make  the  whole  conveniently  available  to  pledge  for  money  with  / 
which  to  reach  the  coast.  But  it  was  not  until  1892,  the  year 
which  campaign  speakers  in  1896  were  wont  to  mention  as  the 
last  of  a  golden  age  of  prosperity — not  until  1892  that  Hill  con- 
trived to  float  with  the  stockholders  of  the  Great  Northern  Com- 
pany a  $15,000,000  issue  of  4  per  cent  ten-year  bonds,  retirable  at 
pleasure,  and  with  the  funds  so  obtained  finished  the  road  to 
Puget  Sound.  But  these  bonds  were  offered  to  the  stockholders 
at  72^/2  per  cent  of  their  par  value, — a  beggarly  operation  com- 
pared with  the  Pactolian  magnificence  with-  which  a  few 
years  afterwards  the  Great  Northern  and  its  one-time  rival,  the 
gigantic,  but  three-times  bankrupt,  Northern  Pacific — jointly 
gave  their  four  per  cent  paper,  two  dollars  per  par  dollar  of  Burl- 
ington stock,  for  practically  all  the  shares  of  the  Burlington  rail- 
way system,  and  with  little  more  noise  than  that  of  the  "tickers" 


102  HF.RTIG  ON  TAXATION. 

which  they  helped  to  keep  busy,  completed  a  two  hundred  mill- 
ion dollar  operation!  Had  the  panic  of  1893  come  on  before 
$  successful  flotation  of  that  $15,000,000  issue  of  four  per 

:  bonds,  it  is  more  than  likely  that  certain  chapters  of  current 
railroad  history  would  have  a  different  reading. 

In  1900,  only  the  recognized  giants  amongst  the  states  were 
ound  to  have  had  during  the  decade  just  closed  a  greater  abso- 
lute increase  in  population  than  Minnesota  had.  Her  increase 
was  440,160.  Six  states  led  Minnesota  in  this  respect, — Massa- 
chusetts, New  York,  Pennsylvania,  Ohio,  Illinois  and  Texas. 
Jhio  led  Minnesota  by  only  45,000.  No  state  of  the  six  leaders 
in  ^  absolute  increase  showed  as  high  a  percentage  therein  as 
Minnesota  except  Texas,  whose  percentage  is  36.4  against  Min- 
nesota's 33.8.  The  "Star  of  the  North"  and  the  "Lone  Star" 
giant  of  the  South  were  neck  and  neck  in  rate  of  increase,  and  led 
all  others  where  those  others  had  a  sizable  basis  of  population  in 
1890.  Where,  in  1890,  a  state  was  in  extreme  infancy,  her  rate  of 
increase  to  1900  would  naturally  be  larger  than  'Minnesota's. 
Thus  Montana's  rate  of  increase  was  75.2  per  cent,  and  North 
Dakota's  70.9  per  cent;  but  Minnesota's  absolute  increase  was 
almost  twice  that  of  those  two  states  put  together,  while  Minne- 
sota's percentage  of  increase  between  1860  and  1870,  trie  decade 
corresponding  in  development  -age  with  the  one  just  finished  for 
those  two  states — was  155.6  percent. 

In  1900  Minnesota's  total  population  of  1,751,394,  was  headed 
in  number  by  eighteen  other  states;  she  had  leaped  from  3oth  in 
1860  to  i  o.th  in  1900.  Of  the  18  that  led  her,  Alabama,  New  Jer- 
sey, Virginia,  and  North  Carolina,  are  in  easy  hailing  distance, 
the  three  latter  leading  with  a  little  more  than  a  hundred  thou- 
sand each,  while  Alabama  leads  by  only  77,000.  No  one  of  these 
four  states  had  as  many  inhabitants  in  1890  as  Minnesota  had 
in  1900;  and  of  those  that  now  lead  her  in  population  by  greater 
numbers  than  they,  Tennessee  in  1890  led  Minnesota's  figure  of 
1900  by  only  16,000;  Georgia  by  86,000;  Iowa  by  160,000,  while 
Wisconsin  showing  the  handsome  increase  of  22.3  per  cent  in 
the  last  decade,  and  now  the  I3th  state  in  point  of  population 
had,  in  1890,  65,000  fewer  inhabitants  than  Minnesota  in  1900. 
In  1880  only  seven  of  the  states,  Massachusetts,  New  York, 
Pennsylvania,  Ohio,  Indiana,  Illinois  and  Missouri,  had  a  greater 
number  of  inhabitants  than  Minnesota  in  1900.  Going  back  to 
1870,  Massachusetts,  Indiana  and  Missouri  drop  below  the 
comparative  level, — Massachusetts  by  nearly  300,000;  Indiana 
and  Missouri  by  less  than  100,000  each.  In  1860,  Illinois,  the 
then  4th  state  in  population,  had  fewer  inhabitants  by  40,000 
than  Minnesota  in  1900;  but  Ohio,  in  1860,  had  nearly  600,000 


HERTIG  ON  TAXATION.  108 

more,  and  as  far  back  as  1850,  229,000  more,  first  passing  Minne- 
sota's 1900  figure  between  1840  and  1850;  while  New  York  and 
Pennsylvania,  then  as  now  giants  in  population,  do  not  sink  to 
Minnesota's  1900  figures  until  respectively  1830  and  1840.  I 
put  1830  for  New  York  when  she  had  increased  to  1,918,000, 
(which  is  almost  exactly  Iowa's  figure  for  1890)  instead  of  1820, 
when  New  York  had  only  1,372,812  inhabitants.  Pennsylvania 
in  1840  had  1,724,033.  These  two  great  states  had  in  1900  re- 
spectively 7,268,894  and  6,302,115  inhabitants.  It  is  therefore 
not  putting  forth  a  violent  presumption  to  state  that  many  per- 
sons now  born  will  live  to  see  Minnesota  have  a  population  of 
seven  millions,  or  more,  especially  as  her  area  exceeds  New 
York's  by  more  than  30,000  square  miles,  roundly  speaking,  and 
Pennsylvania's  by  nearly  40,000  square  miles,  while  her  arable 
area,  owing  to  the  comparative  absence  of  untillable  soil  leads 
that  of  these  two  Eastern  states  by  a  still  greater  percentage. 

In  1900,  then,  this  "Star  of  the  North"  showed  herself  un- 
mistakably endowed  with  the  promise  and  potency  of  first-mag- 
nitude splendor,  soon  to  be  outshone  by  no  one  of  her  sisters. 
Her  84,000  square  miles  of  area,  begemmed  with  lakes  which 
occupy  5,000  of  those  miles,  is,  indeed,  not  first  in  the  physical 
magnitudes  of  the  states.  The  vast  expanse  of  Texas,  measured 
in  266,000  square  miles,  stands  here  at  the  head.  But,  as  Sir 
William  Crookes,  president  of  the  British  Association,  lately 
pointed  out  in  seeking  to  show  that  the  bread-eating  population 
of  the  world  is  fast  overtaking  the  capacity  of  the  world's  wheat 
fields,  the  productive  heart,  or  dependable  agricultural  area  of 
Texas*  is  included  between  the  Red  River  of  the  South,  on  the 
North,  and  30°  30'  latitude  on  the  South  and  the  96th  meridian 
on  the  East  and  the  looth  meridian  on  the  West,  an  area  of 
about  43,000  square  miles;  while  the  banner  agricultural  states, 
Ohio,  Indiana,  Illinois,  Iowa,  and  Missouri,  are  each  consider- 
ably less  in  area  than  Minnesota.  Roundly  speaking,  Minnesota 
is  as  large  as  Indiana  and  Illinois  takeri  together,  is  one  and  a 
half  times  the  size  of  Iowa,  almost  twice  the  size  of  Ohio,  and 


*An  area  in  Texas,  50  per  cent,  larger  than  all  Minnesota,  and  too 
dry  to  cultivate  without  irrigation,  lies  west  of  the  lOOth  meridian.  An 
area  80  per  cent,  as  large  as  Minnesota  lies  in  Texas  south^  of  the  3Oth 
parallel  of  latitude ;  and  an  area  about  half  the  size  of  Minnesota  lies 
east  of  the  p6th  meridian.  It  is  particularly  with  reference  to  the  suc- 
cessful culture  of  wheat  that  Crookes  marked  off  one-sixth  of  Texas 
as  its  dependable  agricultural  area.  He  has  computed  from  the  census 
figures  of  i8co  that  the  sixty  counties  in  that  area  produced  96  per  cent, 
of  the  wheat'grown  in  the  state;  no  less  than  57  per  cent,  of  the  cotton; 
51  per  cent,  of  cereals  of  every  description,  and  a  large  proportion  of  both 
horses  and  cattle. 


104  HERTIG  ON  TAXATION. 

twenty  per  cent  larger  than  Missouri.  Idaho,  Kansas,  and  Utah 
states  approximately  equal  to  Minnesota  in  area,  have  an  im- 
mensely greater  percentage  of  waste  lands.  Were  the  western 
half  of  Kansas  of  dependable  agricultural  value,  as  good  let  us 
suppose  as  her  eastern  half,  Kansas  would  now  doubtless  exceed 
Minnesota  in  population.  She  made  a  giant  stride  ahead  of  Min- 
nesota in  the  decade  following  1870,  kept  ahead,  though  with 
much  diminished  lead,  in  the  decade  ending  with  1890,  but  came 
to  almost  a  stand-still  in  the  last  census  decade,  so  that  Minne- 
sota now  leads  her  in  population  by  almost  300,000.  It  is  not  so 
widely  known  as  it  should  be  outside  of  Minnesota,  that  Indian 
corn  has  heretofore  proved  to  be  a  more  reliable  crop  in  this 
state  than  it  has  even  in  the  great  states  famous  for  corn.  In  a 
good  year,  an  Illinois  corn  field  yields  more  per  acre  than  a  Min- 
nesota field,  but  the  percentage  of  variation  in  Minnesota,  year  in 
and  year  out,  is  much  less  than  in  Illinois.  Of  states,  other  than 
Texas,  larger  than  Minnesota,  Michigan  is  the  only  one  likely  to 
keep  in  the  running  with  Minnesota  for  all  round  development. 
California,  Oregon,  Colorado,  Nevada,  Montana,  Wyoming,  and 
the  Territories  of  Arizona,  New  Mexico  and  Alaska,  the  remain- 
ing states  and  territories  of  greater  area,  have  too  much  moun- 
tain or  other  waste  land,  to  acquire  and  maintain  parity  of  de- 
velopment with  Minnesota,  comparing  average  square  mile  with 
average  square  mile.  Accustomed  in  the  United  States  to  vast 
areas  and  magnificent  distances,  to  fifty  political  divisions  that 
are  states  or  likely  to  become  such,  we  fall  too  often  into  the  habit 
of  lightly  handling  these  political  names,  without  pausing  to 
think  of  what  each  does  or  may  represent,  without  having  in 
mind  here  in  Minnesota  that  the  magnificent  area  of  our  state 
is  within  ten  per  cent  of  equaling  the  aggregate  area  of  Maine, 
New  Hampshire,  Vermont,  Massachusetts,  Rhode  Island,  Con- 
necticut, New  Jersey,  Delaware  and  Maryland, — states  whose 
aggregate  population,  in  1900,  was  within  one  hundred  and  fifty- 
thousand  of  reaching  nine  millions! 

The  above  figures  and  considerations  are  eminently  proper  to 
create  a  fitting  atmosphere  for  viewing  the  tax-problems  of  Min- 
nesota. But  this  work  and  these  views  are  more  than  local ;  Min- 
nesota for  herself  will  settle  nothing  right  unless  she  heeds  the 
like  problems  and  the  attempts  at  their  solution  in  sister  states 
and  in  other  countries;  and  her  own  splendid  material  setting 
with  its  dazzling  promise  of  future  material  development,  differs 
only  in  degree  and  but  slightly  in  kind  from  the  setting  in  which 
her  sister  states  do  or  may  shine.  Describing  her  physical  un- 
folding and  promise  as  the  environment  in  which  her  tax  prob- 
lems grow  and  await  solution,  I  but  describe  an  environment 


HERTIG  ON  TAXATION.  105 

that  is  common,  in  its  main  features,  to  all  the  states  of  the 
Union — with,  however,  this  essential  difference:  Minnesota  and 
her  sisters  of  like  age  or  of  still  later  development  have  the  flex- 
ibility and  initiative  of  youth,  the  ability  to  do  and  dare  with 
more  courage  and  less  routine.  In  this  sense,  the  "Star  of  the 
North"  is  the  Star  of  Hope  as  well.  The  ancient  ridge  which 
crosses  the  state,  and  which  was  once  probably  a  narrow  streak 
of  solid  rock  projecting  from  universal  ocean — is  now  well  cov- 
ered nearly  everywhere  with  fertile  drift;  but  from  that  covered 
ridge  within  the  state,  waters  flow  northward,  southward  and 
eastward — to  Lake  Winnipeg,  to  the  Gulf  of  Mexico,  to  the  St. 
Lawrence;  and  it  is  a  pleasant  thought  that  the  ancient  physical 
backbone  of  this  continent  has  much  in  these  days  of  ours  to 
commend  it  as  moral  and  physical  backbone  of  the  American 
Union. 

At  the  same  time,  let  us  not  forget  that  exultation  in  present 
and  sure  future  growth  is  not  the  only  feeling  with  which  we 
should  face  that  growth.  Let  the  spectre  of  massive  poverty  and 
of  sullen  or  furious  discontent  elsewhere  warn  us  against  es- 
pousing or  perpetuating  conditions  that  will  give  or  tend  to  give 
to  that  spectre  a  flesh-and-blood  reality  among  our  children  and 
children's  children.  Who  would  not  choose  rather  to  see  the 
conditions  of  increase  blighted  than  to  foresee  increase  under 
conditions  wherein  a  future  poet  among  us  may  sing  as  the  sad 
Leopardi,  in  Italy,  sang  at  his  sister's  wedding:  "Your  children 
will  be  starvelings  or  cowards !"  Wealth  makes  not  the  man, 
nor  size  the  state.  Wordsworth  Donisthorpe,  an  English  bar- 
rister, in  his  sturdy  book,  Individualism,  scores  many  a  good 
point,  and  many  a  one  good  enough  in  itself  but  from  which  he 
draws  wrong  conclusions.  But  on  mere  increase  of  population, 
his  biting  satire,  inspired  no  doubt  by  the  spectacle  of  the  swarm- 
ing masses  in  England,  should  give  us  pause,  when  we  are  about 
to  be  carried  away  by  the  American  tendency  to  acclaim  with 
delight  unmixed  each  successive  growth  in  members  of  our  city 
or  state,  "Somebody  says  that  the  land  of  England  would,  if 
properly  cultivated  support  a  hundred  and  forty  millions  of  peo- 
ple. What  of  it?  [To  what  good?]  One  would  suppose  that 
the  end  and  aim  of  the  race  was  to  consist  of  as  many  units  as 
possible,  irrespective  of  their  quality.  *  *  *  What  would  be 
thought  of  an  individual  man  who  set  before  himself  as  the  goal 
of  his  ambition,  the  aim  of  his  life,  to  attain  the  greatest  possible 
weight  or  size?  Possibly  the  land  would  support  a  thousand 
times  that  number  of  flies  if  we  all  agreed  to  cut  our  throats; 
and  what  a  gain  that  would  be.  And  again  I  ask,  Why  Man? 
He  is  an  ugly  beast  at  best,  taking  the  majority  for  a  pattern  (as 


106  HERTIG  ON  TAXATION. 

in  democratic  duty  bound),  something,  thought  Carlyle,  like  a 
split  carrot.  And  if  he  does  happen  to  be  distinguished  from  his 
fellow  animals  by  his  ability  to  lie  and  get  drunk,  what  then? 
*  *  *  In  the  days  to  come  when  the  land  shall  fall  into  the 
hands  of  the  Daniel  Lambert  school,  whose  views  of  the  *  *  * 
[common  weal]  is  ever  increasing  numbers,  we  may  yet  see  a 
hundred  and  forty  millions  of  human  beings  swarming  over  the 
surface  of  the  country;  a  veritable  Age  Saturnian — or  shall  we 
say  Saturnine?  What  a  field  for  the  district  visitor  and  the 
missionary!  What  happy  hunting  grounds  for  the  quack  with 
his  patent  pills !  Fortunately  this  golden  age  lies  in  the  dim  and 
distant  future." — Individualism,,  pp.  254-5. 

Reflections  like  these  may  well  sober  too  jubilant  exultation 
over  prospective  growth,  but  should  not  discourage  the  present 
generation,  even  as  they  cannot  hinder  the  birth  of  future  ones. 
Be  it  our  care  to  solve  present  problems  well,  confident  that. in 
so  doing  we  lay  the  only  possible  foundation  for  the  welfare  oi 
them  who  shall  follow  us. 


CHAPTER  IX. 


Taxation  of  railroads  in  Minnesota  on  a  "contract"  basis — Origin  and 
Meaning  of  such  basis — Legal  questions  as  between  railroads  and  the 
state — Jacobson  gross  earnings  tax  of  four  per  cent. — Minnesota  and 
Wisconsin  tax  ideals  as  varied  by  geography — Basis  of  street  railway 
taxation — Listing  under  oath — Assessed  values  from  1860  to  1901, 
with  state  levy  and  receipts  for  latter  year — Valuations  and  rates  in 
various  Minnesota  counties — Greene  county,  Pa.,  as  typical  county  for 
showing  true  values  of  realty  and  personalty  in  long-settled  rural 
districts — Early  county  and  school  district  finances — Prairie  illustra- 
tions— City  counties  compared  with  rural  counties. 


The  question  of  railroad  taxation  is  not  the  burning  question 
here  that  it  is  in  some  of  the  other  states,  notably  in  Wisconsin, 
Iowa  and  Nebraska, — because  in  Minnesota  the  railroads  are 
taxed  on  a  basis  fixed  for  some  of  them  in  the  days  when  she 
was  yet  a  territory,  and  that  basis  is  thought  by  many  lawyeis 
to  be  permanent  as  constituting  a  contract  between  the  territory 
and  the  railroads,  .which  contract  the  state,  as  the  territory's  sue-, 
cessor,  may  not  abrogate  or  impair  under  that  clause  in  the  Con- 
stitution of  the  United  State  forbidding  a  state  to  "impair  the 
obligation  of  a  contract."  Congress,  in  1857,  granted  certain 
lands  "to  aid  in  the  construction  of  certain  railroads  in  the  then 
territory,  now  state,  of  Minnesota." 

When  soon  afterwards  "the  question  arose,  what  rule  of  tax- 
ation would  prove  most  beneficial  and  equitable,  as  applied  to 
the  several  companies  to  be  entrusted  with  these  enterprises,  and 
to  become  the  recipient  of  the  lands  granted  for  that  purpose?" 
—it  was  answered  by  the  insertion  of  a  special  provision  "in 
each  of  their  charters,"  that  is,  the  charters  of  "the  original  land- 
grant  railroad  companies"  a  provision  "in  the  nature  of  a  con- 
tract obligating  the  then  territory,  now  state,  to  receive  and  the 
company  to  pay  annually  a  certain  percentage  'of  their  earnings 
in  lieu  of  all  [other]  taxes."  This  plan  of  railroad  taxation  was 
adopted  in  lieu  of  subjecting  the  property  of  the  railroads  to 
local  assessment  and  general  taxation  as  other  property  is  as- 


108  HERTIG  ON  TAXATION. 

sessed  and  taxed — -for  these  reasons,  amongst  others:  That  their 
franchises  belonged  to  the  whole  people,  and  so  "the  taxes 
which  they  should  pay  ought  to  be  contributed  to  the  general 
fund  [the  state  treasury]  for  the  benefit  of  all" ;  that  further  and 
specially  the  use  of  those  franchises  in  railroad  construction 
and  operation  "must  necessarily  prove  of  greater  advantage  to 
localities  along  which  they  should  be  built,  than  the  parts  of  the 
country  distant  therefrom;"  that  to  subject  the  lands  to  general 
taxation  as  fast  as  received  by  the  respective  companies,  "strug- 
gling in  their  infancy"  for  means  to  complete  the  roads, 
"would  tend  to  delay  if  not  to  defeat  the  very  object  of  the  grant," 
which  object  was  "to  secure  an  earlv  completion  of  the  roads,"- 
and  a  consequent  rapid  settlement  and  development  of  the  coun- 
try.— Opinion  of  Minesota's  Attorney  General,  February  25. 
1868.  Such  contract  for  an  earnings  tax  having  been  made,  "the 
people  by  the  adoption  of  a  state  constitution  containing  repug- 
nant clauses  could  not  impair  it." — Opinion  of  Minnesota's  At- 
torney General,  March  I,  1865,  citing  Gordon  v.  Appeal  Tax 
Court,  3  Howard,  433. 

The  charter  rights  of  the  original  land-grant  companies  have 
generally,  if  not  in  every  instance,  been  kept  alive  and  many  rail- 
roads in  Minnesota,  though  not  operating  under  the  names  of 
the  original  companies,  either  exercise  the  original  franchises 
under  an  amended  corporate  name,  or  have  otherwise  succeeded 
to  them.  The  Great  Northern  Railway  Company,  for  instance, 
is  in  fact  the  Minneapolis  and  St.  Cloud  Railway  Company,  or- 
ganized in  1856, — its  charter  since  then  having  been  variously 
amended,  besides  the  amendment  changing  the  corporate  name. 
In  1873  the  Minnesota  legislature,  copying,  in  great  measure, 
a  prior  act  (Spl.  laws  of  1865,  sees,  one  and  two,  ch.  6),  passed 
an  act  imposing  a  tax  on  the  St.  Paul,  Still  water  and  Taylor's 
Falls  Railroad  Company  of  one  per  cent  on  its  gross  earnings 
during  the  period  of  three  years  after  a  certain  named  date,  two 
per  cent  for  the  period  of  seven  years  next  following  said  three 
years,  and  three  per  cent  on  each  year's  gross  earnings  after  the 
expiration  of  the  ten  years  embraced  in  said  two  periods — such 
payments  to  make  the  company  "forever  exempt  from  all  [oth- 
er] taxation  and  from  all  assessments."  Included  in  such  exemp- 
tion were  also  "the  lands  granted  to  said  company  to  aid  in  tfu 
construction  of  said  railroad  as  also  the  stock  and  capital  of  sai'l 
company." — Special  Laws,  1873,  ch.  III.,  sec.  I.  It  was  provid- 
ed in  section  two  of  the  same  chapter  that  "Any  railroad  com- 
pany owning  or  operating,  or  which  may  hereafter  own  or  oper- 
ate, any  line  or  lines  of  railroad  in  this  State,  may,  by  resolution 
of  its  board  of  directors,  attested  by  its  secretary  and  filed  with 


HERTIG  ON  TAXATION.  109 

the  secretary  of  state,  accept  and  become  subject  to  the  pro- 
visions of  this  act;  and  in  such  case  the  payment  of  such  per- 
centage in  lieu  of  taxes,  in  accordance  therewith,  shall  com- 
mence from  and  after  the  completion  of  thirty  miles  of  such  line 
hereafter  built,  or  of  the  entire  line,  if  the  same  shall  be  less  than 
thirty  miles  in  length." 

Sections  one  and  two  of  said  act  of  1873,  modeled  on  and 
largely  copying  sections  one  and  two  of  said  act  of  1865,  and 
which  related  specially  to  the  St.  Paul  &  Pacific  Railroad,  are 
still  in  force;  and  by  section  i  of  Chapter  n  of  the  laws  of  1887, 
it  was  enacted  that  any  railroad  company  then  or  thereafter 
owning  or  operating  any  line  or  lines  of  railroad  in  this  state, 
and  not  having  accepted  and  become  subject  to  said  sections  of 
the  act  of  1873,  "shall  become  liable  to  pay,  and  shall  pay,  a  per- 
centage of  its  gross  earnings  in  lieu  of  all  other  taxes,  in  accord- 
ance with  the  provisions  of  the"  said  act  of  1873.  Accordingly 
all  the  railroads  in  Minnesota  pay  a  gross  earnings  tax  in  lieu  ot 
all  other  taxes — new  roads  one  and  two  per  cent  for  the  first 
three  and  the  next  seven  years  respectively,  and  three  per  cent 
thereafter.  All  roads  ten  years  old  or  more  are  on  the  three  per 
cent  basis.  This  tax  is  quietly  and  easily  collected. 

The  only  questions  of  particular  importance  that  arise  under 
the  law  are  questions  of  accounting.  "Fine"  points,  so  to  speak, 
have  been  generally  decided  by  the  courts  against  the  com- 
panies. Thus  while  the  land  grants  proper  of  the  railroads  have 
been  held  exempt  as  per  provision  in  their  charters  in  the  nature 
of  a  contract  (see  p.  108,  above)  ;  yet  where  a  railroad  company 
had  made  a  purchase  of  timber  lands  from  which  to  cut  ties,  it 
was  held  that  these  lands  are  taxable  in  the  hands  of  the  com- 
pany, just  like  lands  in  general  in  the  hands  of  private  owners. 
County  of  Tod'tt  v.  St.  Paul,  M.  &  M.  Ry.  Co.,  38  Minn.  163, 
and  the  Supreme  Court  of  the  United  States  refused  to  reverse 
this  decision. — St.  Paul  &  C.  Ry.  v.  Todd  County,  142  U.  S.  282. 
The  land  grant  is  exempt  by  ''contract;"  and  the  statute,  as  well 
that  of  1865,  as  that  of  1873,  exempts  in  consideration  of  the 
gross  earnings  tax,  all  railroad  property  "held  or  used  for,  in  or 
about  the  construction,  equipment,  renewal,  repair,  maintaining 
or  operating"  the  road.  These  words  of  exemption  are  construed 
strictly,  as  in  the  tie  land  case.  Every  reader  of  legal  education 
knows  that  contracts  or  statutes  exempting  property  from  taxa- 
tion are  construed  strictly,  and  that  doubtful  cases  are,  and  ol 
right  ought  to  be,  resolved  in  favor  of  the  taxing  power.  The 
same  railroad  company  owned  and  maintained  a  large  summer 
hotel  at  Lake  Minnetonka  adjacent  to  its  tracks  and  for  the  pur- 
pose of  Increasing  its  suburban  summer  traffic.  This  hotel  was  held 


110  HERTIG  ON  TAXATION. 

not  exempt  from  ordinary  taxation. — County  of  Hennepin  v.  St. 
Paul,  M.  &  M.  Ry.  Co.,  42  Minn.  ,238.  So,  also,  property 
bought  for  a  future  railroad  use  that  will  exempt  it  from  taxation 
when  so  used,  is  meanwhile  subject  to  ordinary  taxation. — City 
of  St.  Paul  v.  St.  Paul  M.  &  M.  Co.,  39  Minn.  112.  A  railroad 
company,  by  leasing  a  wharf  to  a  coal  company,  takes  it  out  of 
railroad  use,  and  subjects  it  to  ordinary  taxation. — County  of 
St.  Louis  v.  St.  Paul  &  D.  R.  Co.,  45  Minn.  510.  The  St.  Paul 
Union  Depot  Co.  is,  as  it  were,  a  corporate  wheel  within  other 
corporate  wheels.  Its  stock  is  all  owned  by  railroad  companies ; 
they  having  all  paid  to  the  state  taxes  on  their  own  gross  earn- 
ings, made  the  point  that  the  Depot  Company  is  not  liable  to 
pay  a  tax  on  its  gross  earnings;  and  the  point  so  made  was  de- 
cided in  their  favor. — State  v.  St.  Paul  Union  Depot  Company, 
42  Minn.  142.  So  it  had  been  previously  held  that  where  a  rail- 
way company  had  leased  a  portion  of  its  line  for  a  stated  annual 
rent,  such  rent  was  not  a  portion  of  its  gross  earnings  as  not  be- 
ing within  the  letter  of  the  gross  earnings  law  which  taxes  only 
the  gross  receipts  from  operation.  The  court  properly  observed 
that  the  lessee  company  would  have  to  pay  on  the  gross  receipts 
derived  from  its  operating  of  the  line  held  under  lease,  and  that 
to  tax  the  lessor's  rent  would  be  double  taxation. — State  v.  St. 
Paul  M.  &  M.  Co.,  30  Minn.  311. 

.  The  principal  ground  of  dissatisfaction  with  the  gross  earn- 
ings tax  in  Minnesota  is  that  its  operation  does  exempt  the  rail- 
road land  grants  from  taxation  as  ordinary  lands  in  the  hands  of 
private  owners  are  taxed.  This  exemption  is  felt  severely  in 
those  counties  where  there  is  a  considerable  acreage  of  land 
grants  yet  unsold;  but  as  these  lands  are  passing  into  private 
ownership,  where  they  bear  their  pro  rata  burden  of  taxation, 
their  present  non-taxation  is  a  diminishing  cause  of  discontent — 
eventually  to  pass  away,  but  leaving  the  rankling  memory  that 
the  railroads  had  too  good  a  thing.  Naturally  enough  the  dis- 
content with  land-grant  exemption  from  taxation  inspired  both 
desire  and  attempt  to  remedy  the  evil  by  appropriate  legislation 
— an  attempt  which  constitutional  restrictions  reduced  to  mere 
futile  "tail-twisting"  of  the  railway  companies  interested.  In 
1895  the  Minnesota  legislature  passed  an  act  (Laws  1895,  ch. 
1 68),  providing  for  the  taxation  of  these  lands  as  other  lands  are 
taxed,  but  without  in  any  way  affecting  the  gross  earnings  tax. 
An  amendment  to  the  state  constitution,  which  amendment  was 
adopted  Nov.  8,  1871,  had  already  provided  that  any  law  repeal- 
ing or  amending  the  gross-earnings  tax  law,  should  not  take  ef- 
fect unless  submitted  to  a  vote  of  the  people  of  the  state,  and 
adopted  and  ratified  by  a  majority  of  the  electors  of  the  state 


HERTIG  ON  TAXATION.  Ill 

voting  at  the  election  at  which  the  same  should  be  submitted. — 
Constitution,  Art.  IV,  sec.  32a.  So  the  law  of  1895  providing 
for  such  taxation  of  railroad  lands  was  submitted  to  the  people, 
and  adopted  at  the  election  held  in  November,  1896.  As  was  ex- 
pected, the  railway  companies  resisted  payment  of  the  taxes 
on  their  lands.  In  due  time  a  test  case  was  brought,  and  reached 
the  Minnesota  supreme  court. — State  v.  Marr  and  Stearns,  72 
Minn.  200.  The  court  held  that  the  law  of  1895  had  been  passed, 
submitted  and  ratified  with  technical  sufficiency.  It  held  also, 
on  the  merits  of  the  case,  that  the  law  of  1895  was  not  in  viola- 
tion of  the  Constitution  of  the  United  States  as  impairing  the 
obligation  of  a  contract;  for  the  court  decided  that  the  gross 
earnings  tax  laws  themselves  when  passed  were  m  violation  of 
the  Constitution  of  Minnesota,  namely,  that  part  of  section  I, 
of  article  IX,  which  provides:  "All  taxes  to  be  raised  in  this 
state  shall  be  as  nearly  equal  as  ma;y  be,  and  all  property  on 
which  taxes  are  to  be  levied  shall  have  a  cash  valuation  and  be 
equalized  and  uniform  throughout  the  state." 

And  of  that  part  of  section  3  of  article  IX,  which  provides: 
"Laws  shall  be  passed  taxing  all  moneys,  credits,  investments 
in  bonds,  stocks,  joint  stock  companies,  or  otherwise,  and  also 
all  real  and  personal  property  according  to  its  true  value  in 
money." 

Naturally,  if  the  gross  earnings  tax  laws  were  themselves  un- 
constitutional they  could  not  create  a  valid  contract  whose  im- 
pairment is  forbidden  by  the  Constitution  of  the  United  States. 
The  court  held,  however,  that  section  32a,  of  article  IV,  above 
referred  to,  does,  by  its  reference  to  "any  law  or  laws"  providing 
for  a  tax  on  the  gross  earnings  of  railroads  in  lieu  of  all  other 
taxation,  and  by  prescribing  conditions  "for  the  repeal  or  amend- 
ment" of  such  law  or  laws — does  in  effect  validate  and  make  them 
constitutional.  The  court  held  further  that  this  validation  did  not 
make  the  gross  earnings  tax  laws  take  on  the  nature  of  a  contract 
which  the  state  could  not  change.  As  the  court  put  it,  "this  rati- 
fication or  validation  of  the  statutes  was  a  qualified  one  and  the 
right  to  repeal  or  amend  them  was  reserved  by  necessary  implica- 
tion, provided  such  appeal  was  adopted  and  ratified  by  a  majority 
of  the  electors." 

This  decision  would  have  been  a  knock-out  blow  for  the 
contract  theory  of  the  railroads,  haa  it  been  final.  But  the  Su- 
preme Court  of  the  United  States  had  jurisdiction  to  review  the 
case,  because  it  presented  the  case  of  a  right  claimed  under  the 
Constitution  of  the  United  States,  and  denied  in  the  state  court. 
The  railroads,  therefore,  carried  the  case  up  to  this  "eminent 
tribunal,"  which  reversed  the  Supreme  Court  "of  Minnesota,  and 


112  HERTIG  ON  TAXATION. 

held  that  the  gross  earnings  tax  laws  do  constitute  a  contract 
with  the  land  grant  companies  which  the  state  may  not  "impair." 
It  held  also  that,  as  to  the  state  court's  construction  of  the  state 
constitution,  while  the  federal  courts  usually  adopt  such  con- 
struction as  binding  on  them,  yet  the  federal  court  will  use  its 
own  independent  judgment,  "when  the  question  of  contract  is 
presented." — Stearns  v.  Minnesota,  179  U.  S.  223.  That,  in  any 
event,  statutes,  such  as  the  gross  earnings  tax  laws,  acquiesced 
in  by  the  administrative  department  of  the  state  and  by  the  state 
courts  for  a  long  period  of  years — were  not  at  this  late  date  to  be 
declared  unconstitutional  in  their  inception.  While  there  was  no 
dissenting  opinion,  four  of  the  justices,  White,  Harlan,  Gray  and 
McKenna,  intimated  that  if  the  question  had  really  turned  on  a 
true  repeal  or  a  true  amendment  of  the  gross  earnings  tax  law, 
under  sec.  32a  of  article  IV  of  the  state  constitution,  their  con- 
clusion might  have  been  different;  that,  in  effect,  a  law  which 
leaves  the  gross  earnings  tax  stand  without  impairment  or  dim- 
inution, but  singles  out  of  the  property  covered  by  the  grass 
earnings  tax,  some  of  it  for  ordinary  taxation,  a  mode  of  taxation 
having  no  natural  connection  with  the  gross  earnings  tax — • 
neither  repeals,  nor,  properly  speaking,  amends  the  gross  earn- 
ings tax  law;  hence,  conceding  that  section  32a  of  article  IV, 
of  the  Minnesota  constitution  affords  sufficient  warrant  for  re- 
peal or  amendment  of  the  gross  earnings  tax  law,  it  does  not  ap- 
ply to  the  case  before  the  court,  which  presents  neither  true  re- 
peal nor  true  amendment.  I  have  gone  into  this  with  some  mi- 
nuteness, because  such  intimation  of  the  federal  judges  'seems 
to  afford  the  only  ground  of  hope  that,  if  what  is  known  as  "the 
Jacobson  gross  earnings  tax  law"  (Laws  of  1901,  ch.  150),  which 
is  to  be  submitted  to  the  people  at  the  election  in  November, 
1902,  shall  be  ratified  by  the  people, — it  may  be  held  valid  by 
the  Supreme  Court  of  the  United  States.  This  law  prescribes  a 
four  per  cent  gross  earnings  tax  in  lieu  of  the  present  percent- 
ages. It  is  somewhat  boldly  drawn,  and  does  not  save  to  new 
railroads  the  one  per  cent  tax  for  their  first  three  years  and  the 
two  per  cent  tax  for  the  following  seven.  See  chapter  xvii,  below, 
for  fuller  notice.  "Gross  earnings,"  by  uniform  practice  of  the 
railroad  companies  reporting  them  and  by  definition  of  subse- 
quent statute,  mean  "all  earnings  on  business  beginning  and  end- 
ing within  the  state  and  a  proportion  based  upon  the  proportion 
of  mileage  within  the  state  to  the  entire  mileage  over  which  such 
business  is  done,  of  earnings  on  all  inter-state  business  passing 
through,  into  or  out  of  the  state,  and  shall  include  gross  earnings 
of  all  express  companies,  fast  freight  lines,  sleeping  and  parlor 
car  companies,  and  other  common  carriers,  corporations,  or 


HERTIG  ON  TAXATION.  113 

persons,  doing  business  or  transporting  persons  or  property  on 
and  over  the  lines  or  right  of  way  of  any  railroad  company  with- 
in the  state  by  virtue  of  an  agreement,  contract  or  arrangement 
of  any  nature  with  such  railroad  company." — Statutes  of  1894, 
sec.  2753. 

The  constitutionality  of  the  proposed  Jacobson  law,  if  ratified 
by  the  people,  will  not  be  seriously  drawn  in  question,  except  in 
its  application  to  those  roads  which  are  protected  by  the  early 
"contract"  franchises  above  mentioned.  Its  adoption  will  make 
the  question  of  railroad  taxation  a  burning  one  until  the  question 
of  constitutionality  is  settled,  and  still  longer,  should  it  be  settled 
in  favor  of  the  railroads. 

The  revenue  which  the  state  receives  from  the  gross  earnings 
tax  on  railroads  is  a  handsome  sum;  and  in  ten  years,  taking 
the  revenue  for  1891  and  1901  for  the  basis  of  comparison,  it  has 
more  than  doubled.  The  gross  earnings  tax  on  receipts  for  1891 
amounted  to  $750,742.10;  for  1901,  it  amounted  to  $1,658,779.- 
84.  The  gross  earnings  tax  in  Minnesota  and  in  Wisconsin  af- 
fords a  striking  illustration  of  how  a  slight  difference  in  geog- 
raphy, is  sufficient  to  make  a  wide  difference  in  the  tax  reform 
ideals  of  people  speaking  the  same  language,  pursuing  like  ends, 
and  professing  like  federal  allegiance.  Wisconsin,  by  judicial 
construction,  has  a  "wide-open"  constitution,  and  has  chosen, 
under  the  liberty  so  afforded  to  put  her  railroads  under  a  gross 
earnings  tax.  This  with  her  is  not  by  technical  "contract"  but 
by  plain  statute,  subject  at  any  time  and  in  ordinary  course  to 
amendment  or  repeal.  Minnesota,  contract-tied,  has  now  a  three 
per  cent  tax;  Wisconsin,  free  from  contract,  has  already  a  four 
per  cent  tax.  Minnesota's  ideal  is  to  raise  the  gross  earnings 
tax  to  four  per  cent  by  means  of  the  Jacobson  bill  to  be  voted  on 
by  the  people  in  November,  1902;  Wisconsin's  ideal,  as  cham- 
pioned by  Gov.  La  Follette  and  by  his .  friends,  is  to  raise  her 
gross  earnings  tax  to  $y2.  per  cent.  (See  ch.  VII.)  As  Em- 
erson says,  "Want  is  a  growing  giant  which  the  coat  of  Have 
is  never  broad  enough  to  cover." 

In  Minnesota,  as  generally  in  the  states,  a  street  railway 
is  not  technicaly  a  railroad.  Street  railways  in  Minnesota  are 
taxed  on  the  value  of  their  real  and  personal  property,  and  on 
the  balance  of  the  market  value  of  their  shares  of  stock,  if  they 
have  a  market  value,  or  on  the  balance  of  their  actual  value,  if 
they  have  no  market  value — that  is  to  say,  on  the  balance  struck 
by  deducting  from  such  market  or  actual  value  an  aggregate 
composed  of  the  company's  indebtedness,  the  value  of  its  real 
property,  if  any,  and  of  the  value  of  its  personal  property.  The 
statute  provides  that  the  track  of  a  street  railroad  company 


114  HERTIG  ON  TAXATION. 

"shall  be  held  to  be  personal  property."  —  Statutes  of  1894,  sec. 


. 

It  is  sufficient  for  the  purpose  of  this  work  and  of  this  chap- 
ter to  add  that  Minnesota,  as  the  reader  has  already  seen  from 
parts  of  sections  one  and  three  of  Art.  IX  of  her  constitution, 
aims  at  taxing  all  real  and  personal  property  on  the  basis  of  its 
cash  value  and  at  a  uniform  rate  on  such  value.  There  are  the 
usual  exemptions  of  church  property,  public  property,  etc.,  and  a 
constitutional  authorization  to  the  legislature  to  exempt  person- 
al property  from  taxation  "to  an  amount  not  exceeding  in  value 
two  hundred  dollars  for  each  individual."  But  so  far  the  legisla- 
ture has  not  gone  beyond  making  such  individual  exemption 
one  hundlred  dollars. 

Minnesota  has  not  as  yet  enacted  any  stringent  laws  to  aid  her 
tax  officials  in  ferreting  out  personal  property  that  escapes  tax- 
ation. Listing  under  oath  is  prescribed  (sec.  1523,  statutes  of 
1894),  but  no  penalty  is  prescribed  for  refusing  to  so  list.  If  the 
assessor  thinks  that  the  person  required  to  list  "has  not  made 
a  full,  fair  and  complete  list  of  such  property,  he  may  examine 
such  person  under  oath;"  but  the  only  penalty-  for  refusal  to  an- 
swer under  oath  is  that  "the  assessor  may  list  the  property 
*  *  *  according  to  his  best  judgment  and  information.''  —  Id. 
sec.  1525.  The  assessor,  if  not  always  a  "gentleman"  in  Mrs. 
Astor's  sense  of  the  word,  has  usually  a  gentlemanly  regard  for 
the  feelings  of  his  patients,  and  a  gentlemanly  modesty  that 
keeps  him  from  over-bold  guessing.  Seldom  indeed  does  he 
make  a  guess  that  costs  him  thereafter  a  vote. 

The  total  assessed  values  of  real  and  personal  property  in  the 
state  for  the  earliest  year  whose  figures  for  both  realty  and  per- 
sonalty are  before  me,  1860,  were  $36,753,408;  for  1870,  assessed 
values  aggregated  $87,179,257;  for  1880,  $258,055,543;  for  1890, 
$558,820,215;  for  1900,  $588,016,688.  As  the  railroads 
pay  only  a  gross  earnings  tax,  their  value  is  in  no 
wise  represented  in  the  above  figures.  Persons  who  delight  to 
map  out  the  course  of  things  in  lines  and  curves  platted  on  paper 
will  find  it  a  very  easy  graphic  problem  to  construct  a  curve 
showing  the  relation  of  the  assessed  values  of  personal  property 
in  Minnesota  to  the  aggregate  values  of  realty  and  personal- 
ty. Settlers  in  mass  are  always  poor  in  personal  property.  What 
they  have,  however,  is  mostly  visible  and  tangible,  and  as  it  con- 
sists largely  of  the  domestic  animals,  it  increases  as  rapidly  as 
they  do.  Land  at  first  is  the  new  country's  main  taxable  asset. 
The  curve  of  the  percentage  of  assessed  personal  property  be- 
gins a  little  above  a  horizontal  line  representing  zero  and  rises 
rapidly  to  a  height  graphically  representative  of  25  per  cent. 


HERTIG  ON  TAXATION.  115 

when  the  curve  gradually  begins  to  sink  in  a  slightly  scalloped 
line.  Thus  in  1860,  the  aggregate  assessed  value  of  Minnesota 
personalty,  $4,731,495,  was  in  round  numbers  13  per  cent  of  the 
aggregate  valuation  of  the  state.  By  1865,  it  had  shot  up  to  a 
trifle  over  25  per  cent;  in  1870,  had  already  dropped  to  23  per 
cent;  in  1880,  had  fallen  to  21  per  cent;  in  1890,  to  a  little  less 
than  16  per  cent;  and  by  1895  had  returned  almost  to  the  orig- 
inal level  by  further  dropping  to  13  3-10  per  cent.  This  extreme 
depression,  however,  was  due  to  hard  times  and  not  quite  nor- 
mal as  the  percentage  rose  again  to  a  little  less  than  17  per  cent, 
in  1900  and  to  a  little  less  than  18  per  cent,  in  1901.  In  1901, 
assessed  values  of  personal  property  reach  high-water  mark  in 
the  history  of  the  state  with  an  increase  of  $9,000,000  over  1900, 
and  a  total  of  $107,840,044.  The  years  1900  and  1901  covered 
one  biennial  assessment  period  for  realty ;  hence  assessed  values 
of  realty  for  1901  were  increased  only  as  new  acreage  (convey- 
ances to  individuals  by  railroads  out  of  their  grants  and  by  the 
United  States  out  of  the  public  domain)  was  entered  for  taxation, 
and  new  or  improved  buildings  on  lands  and  lots  were  marked, 
by  local  assessors  and  boards,  and  the  owners'  realty  assessments 
increased  over  the  preceding  year  according  to  law.  These  items 
increased  assessed  realty  values  nearly  $4,000,000  for  1901  as 
compared  with  1900.  Minnesota's  grand  total,  then,  of  assessed 
values  for  1901,  the  first  year  of  the  2Oth  century,  is  $600,980,- 
614,  of  which  grand  total  assessed  values  of  personal  property 
constitute,  as  already  stated,  18  per  cent. — very  nearly. 

The  "new  prosperity"  first  began  to  be  reflected  in  the  per- 
sonal property  assessed  values  for  1898.  While  the  totals  under 
this  head  for  1897,  $85,624,134,  were  only  half  a  million  more 
than  for  1895,  the  leanest  in  personal  property  assessments  of  the 
lean  Grover-Cleveland  years, — the  totals  for  personal  property  in 
1898  leaped  to  $89,448,796;  in  1899  leaped  to  $92,808,154,  and  in 
1900  to  $98,803,235,  when  they  first  passed  the  previous  high-wa- 
ter mark  set  by  1892  at  $96,043,649.  Note,  however,  that  real 
estate  assessments  for  the  years  1892,  1894  and  1895  reached 
higher  figures  per  acre  ($7.88,  7.96  and  7.71  respectively)  than 
ever  before  or  since ;  and  that  the  aggregate  assessed  values  of 
realty  and  personalty  for  said  three  years  were  respectively  $637,- 
459,928,  $638,916,326,  and  $641,250,280 — greater  aggregates  than 
the  state  showed  before,  or  has  shown  since.  The  year  1895 
holds  the  banner  for  low  percentage  of  personal-property  values 
included  in  her  aggregate — just  a  trifle  less  than  13  3-10  per  cent. 

In  1870,  the  total  of  all  taxes  levied  within  the  state  for  all 
purposes  was  $2,619,764.17,  making  the  average  rate  on  the  as- 
sessed valuation  3  per  cent.  In  1880,  the  like  total  was  $4,191,- 


116  HERTIG  ON  TAXATION. 

811.41  ;  the  average  rate  only  16.2  mills  on  the  dollar.  The  next 
five  years  saw  marvels  in  the  development  of  the  state,  and  the 
total  of  all  taxes  levied  in  1885  leaped  up  to  $8,383,696.67  ;  the 
rate  to  20.9  mills  on  the  dollar.  In  1890,  the  total  of  all  tax  levies 
within  the  state  was  $12,707.563.94,  the  rate  21.6  mills  on  the 
dollar.  From  1892  to  1900  inclusive  the  aggregate  of  all  taxes 
for  any  of  said  years  was  nearly  the  same,  less  than  a  million 
more,  less  than  half  a  million  less,  than  $14,000,000, — the  year 
1900  leading  in  aggregate  and  in  rate,  $14,963,901.76,  and  25.4 
mills  thereon. 

The  first  year  of  the  new  century  leads  off  with  a  substantial 
increase  in  the  aggregate  of  all  taxes,  and  some  increase  in  rate, 
over  any  one  of  the  ten  preceding  years, — aggregate  and  rate 
for  1901  being  respectively  $16,269,671.55,  and  27.1  mills  on  the 
dollar.  In  said  aggregate  the  total,  levy  for  the  state  treasury 
was  $2,045,447.92.  But  to  the  budget  of  the  state  proper  must 
be  added  $1,658,779.84  paid  into  the  state  treasury  in  1901  by  the 
railroads  in  settlement  of  their  gross  earnings  tax.  Nor  must  the 
"private  economic"  assets  of  the  state  be  forgotten.  On  August 
i,  1901,  she  owned  of  her  own  funding  bonds,  and  of  the  bonds 
of  six  other  states,  an  aggregate  of  $8,560,718.32.  She  owned 
in  interest-bearing  contracts  for  lands  sold,  $5,024,691.27.  She 
owned  in  unsold  lands  acreage  enough  to  bring  this  total  of  her 
revenue-producing  property  to  $20,000,000.  That  the  income 
from  these  sources  must  be  used  for  permanent  school  and  uni- 
versity purposes  makes  it  none  the  less  a  state  revenue. 

A  scrutiny  of  aggregate  assessed  values  by  counties  and  of 
county  rates  for  the  year  1901,  shows  interesting  facts.  Cook 
county  has  the  record  for  small  value  of  personal  property,  ab- 
solute and  relative.  Her  total  valuation  is  $1,290,723,  of  which 
only  $22,549  (less  than  the  fiftieth  part)  represents  the  assessed 
value  of  personal  property.  But  this  is  an  undeveloped  county, 
having  in  "town  and  citv  lots  including  structures  thereon"  only 
$16,559.  At  the  same  time,  while  the  average  assessed  value  of 
lands  for  the  whole  state  in  1901  was  $7.25  per  acre,  and  in  Cook 
county  $4.46  per  acre,  no  less  than  seventeen  counties  had  average 
assessed  land  values  of  less  than  $4.46  per  acre,  while  two  of  the 
seventeen,  Roseau  and  Aitkin,  had  land  values  respectively  only 
of  $1.44  and  $1.47  per  acre.  Roseau  has  not  only  the  record  for 
the  lowest  value  per  acre,  but  also  for  the  lowest  taxable  acreage, 
135,712  acres;  for,  though  Ramsey  returns  but  56,131  taxed 
acres,  that  is  because  her  area  is  mostly  taxed  in  St.  Paul 
lots.  Roseau,  too,  holds  the  record  for  the  ratio  of  personal 
property  values  to  real  estate  values,  $145,503  out  of  an  aggre- 
gate for  both  values  of  $364,797 — 40  per  cent!  She  holds  the 


HERTIG  ON  TAXATION.  117 

record  for  the  smallest  total  levy,  $18,661.27,  and,  with  her  rate 
of  51.2  mills  on  the  dollar,  would  hold  the  record  for  highest  rate 
but  for  Red  Lake  county  topping  that  rate  and  record  with  53.8 
mills. 

Minnesota  having  counties  in  all  stages  of  development  af- 
fords an  ample  domain  in  which  to  verify  the  conclusions  which 
a  tolerable  observer  could  hardly  fail  to  make,  without  special 
study  of  those  figures,  which  show  the  development  of  taxable 
personal  property  in  relation  to  taxable  realty.  First .  a  large 
country,  or  county,  "out  of  doors,"  as  the  saying  runs,  that  is, 
land  wild  and  cheap,  population  scant  in  number  with  little  money-, 
and  little  personal  property  of  any  kind,  but  with  opportunity  to 
every  one's  hand  for  getting  a  farm,  or  a  "claim"  that  shall  be- 
come one.  If  in  such  country  Or  county  the  soil  is  good,  and  the 
tide  of  settlement  flows  that  way  in  sizable  volume,  there  is  a  rap- 
id increase  in  population  and  in  assessed  values  of  personal  prop- 
erty. Each  settler  has  abundance  of  food  and  shelter  for  domes- 
tic animals;  he  needs  them,  and  they  multiply  rapidly.  If  he  is 
first  caught  by  the  easy  tillage  of  a  prairie  farm  and  the  invita- 
tion it  holds  out  to  grow  large  fields  of  grain,  and  to  neglect 
stock-raising,  still  he  will  soon  have  neighbors  to  point  him  out 
a  better  path ;  and  meanwhile  he  will  go  in  for  horses,  machinery 
and  the  like, — all  tangible  personal  property.  Land  will  of 
course  rise  in  price  and  value,  but  not  at  first  so  fast  as  to  keep 
proportionate  pace  with  the  expansion  of  personal  property  val- 
ues. Then,  too,  a  psychological  factor  comes  in  to  modify  the 
first  assessments  of  lands  in  a  new  country ;  men  carry  there  their 
standards  of  value  from  other  counties ;  and  while  they  make  a 
very  considerable,  often  a  nearly  or  quite  sufficient,  allowance  for 
the  abundance  and  cheapness  of  the  lands  in  their  new  home,  yet 
very  often  an  assessment  figure  for  land  is  reached  and  adhered 
to  because  it  seems  ridiculous  to  put  the  value  any  lower,  and 
such  stand  is  often  voiced  and  summarized  with  the  remark,  "It's 
worth  that  if  its  worth  anything!"  Add  to  this  the  urgent  need, 
re-inforced  often  by  an  over-urgent  clamor,  for  revenue  in  a  new 
country,  while  there  is  yet  almost  no  personal  property  to  tax; — 
and  it  becomes  apparent  why  and  how  the  land  tax  is  burdensome 
from  the  outset,  and  why  and  how,  if  the  new  country  develops 
rapidly,  the  assessed  values  of  personal  property  show  for  awhile 
a  greater  percentage  of  increase  than  the  assessed  values  of  the 
land.  Itasca,  for  instance,  is  one  of  the  large  and  new  counties 
in  Minnesota,  and  has,  speaking  roundly,  900,000  taxed  acres. 
St.  Louis,  with  1,887,877  acres;  Otter  Tail,  with  1,214,919,  and 
Polk,  with  1,138,658 — are  the  only  counties  that  lead  Itasca  in 
taxed  area.  Now  Itasca  has  a  total  assessed  valuation  of  $5,353,- 


118  HERTIG  ON  TAXATION. 

774,  of  which  aggregate  only  $212,121  (not  quite  4  per  cent.), 
represents  the  assessed  value  of  personal  property.  Yet  the  as- 
sessed value  of  Itasca  lands  averages  $5.47  per  acre  (only  $1.78 
below  the  average  for  the  whole  state),  and  she  levies  the' aggre- 
gate sum  of  $144,175.25  for  local  and  state  purposes,  at  an  aver- 
age rate  of  26.9  mills  on  the  dollar, — the  average  rate  for  all 
Minnesota  being  27.1  mills,  or  just  2-10  of  a  mill  higher.  Red 
Lake  county,  already  mentioned  as  having  the  highest  rate  of 
taxation  in  the  state,  53.8  mills  on  the  dollar,  is  a  Red  River 
valley  county,  though  i'olk  county  is  between  her  and  the  river. 
.Red  Lake  has  a  fertile  soil  and  many  other  natural  advantages. 
She  has  been  settled  long  enough  to  show  that  20  per  cent,  of 
her  aggregate  assessed  value  is  in  "town  and  city  lots  including 
structures  thereon."  She  is  remarkable  for  the  length  and 
vehemence  of  a  contest  within  the  limits  of  her  county  seat  town 
as  to  where  the  business  center  thereof  should  finally  be — friends 
of  this  or  that  spot  backing  up  their  friendship  by  building  ac- 
cordingly. Good  as  her  acre  lands  are,  she  has  contrived  to  keep 
their  valuation  down  to  $2.28  per  acre,  aided  no  doubt  by  satis- 
factory growth  in  her  taxable  personalty  and  in  her  "town  and 
city  lots,"  perhaps  by  sturdy  effort  on  the  part  of  her  farmers  to 
saddle  taxes  on  }he  other  fellow.  She  leads  all  the  counties  but 
Roseau  in  the  ratio  of  taxable  personal  property  to  aggregate  of 
realty  and  personalty;  both  kinds  aggregate  $1,527,867,  of  which 
$382,479,  or  a  little  more  than  25  per  cent,  represents  the  assessed 
value  of  personal  property. 

In  this  connection  it  may  be  observed  that  if  a  given  county 
has  so  far  got  its  age  and  growth  that  changes  in  the  number  of 
its  inhabitants  and  in  the  selling  price  of  its  lands  are  slight  and 
gradual ;  and  if  such  county  remains  so  far  rural  and  agricultural 
that  no  more  than  about  one-eighth  to  one-tenth  of  its  inhabi- 
tants live  in  towns  and  villages, — it  may  be  assumed  with  toler- 
able safety  that  the  "true  value  in  money"  of  all  the  personal 
property  owned  in  such  county  will  not  aggregate  very  much 
more,  and  but  little  less,  than  25  per  cent  of  the  "true  value  in 
money"  of  the  aggregate  real  estate  therein  ;  and  this  upon  the 
basis  of  measuring  values  by  the  cash  price  that  can  be  obtained 
at  private  sale  for  both  kinds  of  property,  as  evidenced  by  actual 
sales.  Legislators  and  students  of  taxation,  by  bearing  in  mind 
facts  of  this  description,  would  be  less  "rattled"  by  loose-jointed 
talk  of  the  vast  amounts  of  personal  property  that  escape  taxa- 
tion. The  personal  property  of  certain  individuals  and  of  cor- 
porations in  some  places  undoubtedly  does  escape,  largely  escape, 
the  efforts  to  tax  it.  Even  in  rural  counties,  after  a  certain  time, 
a  good  deal  of  personal  property  escapes  ;  but  in  seeking  to  correct 


HERTIG    ON    TAXATION.  119 

this  or  any  evil,  the  first  thing  is  to  get  an  approximately  clear 
conception  of  its  extent. 

The  attempt  of  the  "Committee  appointed  hy  the  Tax  Con- 
ference of  Pennsylvania  Interests/'  to  value  accurately  all  of  the 
property  in  that  state  is  very  interesting.  (See  farther  mention 
of  said  Committee  in  ch.  XVIL,  below.)  From  the  mass  of  facts 
and  figures  reported  by  the  committee,  I  select  those  bearing  on  a 
Pennsylvania  county  which,  from  personal  knowledge  of  the  same 
I  have  taken  as  a  typical  agricultural  county,  fairly  prosperous 
and  nearly  stationary.  This  is  Greene  county.  Population  in 
1890,  28,935;  in  1900,  28,281.  Borough  and  village  population 
in  1890,  3,300;  in  1900,  4,055.  The  actual  increase  in  borough 
and  village  population  in  ten  years  was  only  a  little  more  than 
400  instead  of  the  apparent  increase  of  755 ;  for  Mount  Morris, 
an  ancient  and  straggling  country  village  became  incorporated 
within  the  decade,  and  shows  in  the  census  of  1900  with  345  in- 
habitants,— changed  in  form  but  little  changed  in  substance. 
Greene  county,  then,  with  a  farm  and  pasturage  area  of  396,800 
acres,  and  with  about  i-io  of  her  real  estate  values  in  borough 
and  village  property,  had  in  1892,  according  to  the  Pennsylvania 
Committee  the  following  aggregate  actual  values : 

Total  real  estate   $17,103,804 

Total  personal  property   4,235,400 

Moneyed   capital    (not   included  in   last 

item)    1,000,000 


Total  actual  values $22,339,204 

Percentage  of  personal  property 23^ 

The  item  of  moneyed  capital,  $1,000,000,  is  an  independent 
estimate,  Greene  being  one  of  the  counties  whose  "moneyed  cap- 
ital" the  committee  had  not  satisfactory  data  for  estimating. 

I  return  to  Minnesota  tax  statistics  for  1901.  Dodge  is  the 
banner  county  for  low  rate  of  taxation,  16.8  mills  on  the  dollar, 
as  against  her  nearest  competitors, — Carver  with  18.2  mills,  Sib- 
ley  with  18.7  mills,  Houston  with  19.1  mills,  McLeod  with  19.5 
mills,  Olmstead  with  19.6  mills.  No  other  counties  have  a  rate 
below  20  mills  on  the  dollar.  Thirty-five  counties  have  a  rate  of 
over  20  and  less  than  25  mills  on  the  dollar.  Nineteen  counties 
have  a  rate  of  over  25  and  less  than  30  mills  on  the  dollar.  Nine 
counties  have  a  rate  of  over  30  and  less  than  35  mills  on  the 
dollar.  Eight  counties  run  under  40  and  above  35  mills  on  the 
dollar;  and  the  five  remaining  counties  run  from  43.1  mills  to 
53.8  mills  on  the  dollar. 

Dodge  county,  the  leader  in  low  rate,  has  an  aggregate  as- 
sessed valuation  of  $5,186,644,  of  which  but  a  trifle  more  than 


120  HERTIG    ON    TAXATION. 

the  tenth  part — $534,679,  to  speak  exactly — represents  the  as- 
sessed valuation  of  her  "town  and  city  lots  including  structures 
thereon."  Her  acres  have  an  average  valuation  of  $13.55, 
which  is  nearly  as  high  as  the  acre  valuation  anywhere  in  the 
state  outside  of  the  large  city  counties  of  Hennepin  and  Ramsey. 
Outside  of  those  two  counties,  only  Blue  Earth,  Dakota  and 
Washington  counties,  $14.45,  $H-66  and  $14.11  respectively, — 
have  a  higher  average  valuation  on  their  acres  than  Dodge  county 
has.  Olmsted,  $13.52,  and  'Carver  $13.29,  are  next  below 
Dodge  in  valuations  per  acre.  In  the  agricultural  counties  that 
run  above  Dodge  in  acre  valuations  and  in  those  mentioned  as 
running  just  below  her  in  that  respect, — the  rates  of  taxation  are 
almost  correspondingly  moderate, — 20.8  mills  for  Blue  Earth, 
1 8.2  mills  for  Carver,  22.4  mills  for  Dakota,  19.6  mills  for  Olm- 
sted, 23.9  mills  for  Washington.  It  may  be  safely  assumed 
that  the  gradations  in  these  rates  depend  very  largely  on  the  rel- 
ative amounts  and  numbers  of  urban  property  and  urban  popula- 
tion in  the  counties  just  mentioned.  Washington,  with  the  high- 
est rate  in  the  five,  contains  the  important  city  of  Stillwater,  and 
in  her  aggregate  valuation  of  $8,716,325,  the  sum  of  $3,609,833 
represents  the  assessed  value  of  'town  and  city  lots,  including 
structures  thereon."  Dakota,  with  the  next  highest  rate  in  the 
five  has  in  "town  and  city  lots,"  etc.,  $1,782,170  out  of  a  total 
valuation  of  $7,860,973,  while  Blue  Earth,  with  a  rate  1.6  mills 
lower  than  Dakota  has  a  somewhat  higher  percentage  of  urban 
property  in  her  total  valuation, — $2,796,194  out  of  $11,494,543. 
But  special  variations  in  administration  and  in  financial  need  in 
both  city  and  county  subdivisions  easily  account  for  departures 
from  theoretical  proportion.  In  Carver,  however,  and  in  Olmsted, 
both  with  low  rates  ('Carver's  only  1.4  mills  above  that  of 
Dodge)  the  relation  of  urban  property  to  rate  of  taxation  is  very 
evident.  Carver's  urban  property  amounts  to  only  $372,923  in  a 
total  valuation  of  $3,945,319;  Olmsted's  to  $1,398,836,  or  not 
quite  one-fifth,  in  a  total  valuation  of  $8,651,156.  In  Sibley, 
Houston  and  McLeod,  above  mentioned  as  respectively  third, 
fourth  and  fifth  in  point  of  low  rates  of  taxation, — assessed  val- 
ues of  lands  are  well  above  the  average  for  the  whole  state  of 
$7.25  per  acre ;  in  the  case  of  Sibley  and  McLeod,  respectively, 
$10.58  and  $12.08  per  acre,  while  Houston,  dipping  closer  to  the 
general  average,  has  $7.50  per  acre.  Sibley's  urban  property  is 
only  $391,049,  out  of  a  total  of  $5,062,653;  Houston's  $396,015 
out  of  $4,001,541  ;  McLeod's  $648,857  out  of  $5,204,421  ;  that  is 
to  say  about  one-thirtieth,  one-tenth  and  one-eighth  respectively. 
In  all  these  counties  of  low  rates,  prosperous  agricultural 
counties,  among  the  oldest  in  the  state,  and  hence  no  longer  in 


HERTIG    ON    TAXATION.  121 

the  fitful  fevers  of  early  infancy,  we  see  that  good  lands  and  the 
relative  insignificance  of  city  property  and  city  population — are 
the  chief  determining  factors  in  the  rates  of  taxation.  Good  lands 
in  advanced  development  bring  up  the  average  valuation  of  acres 
in  their  county;  absence  or  relative  insignificance  of  urban  de- 
velopment means  practically  no  taxes  'for  police,  fire. department, 
streets,  sewers,  expensive  graded  and  high  schools,  and  the  like. 
Schools  of  course  are  everywhere,  and  their  maintenance  counts 
up  for  a  heavy  item  in  all  American  local  taxation.  Perhaps 
the  burden  of  taxes  for  schools  is  nowhere  felt  quite  so  severely 
as  in  the  newly  settled  counties  of  the  Northwest, — a  stage  of  de- 
velopment through  which  all  the  counties  must  pass  or  have 
passed.  About  the  first  school  house  in  a  new  district,  sometimes 
clusters  a  greed  as  eager  and  as  reckless  as  that  which  on  a  more 
ambitious  scale  manifests  itself  on  'change  in  metropolitan  cities. 
When  settlements  are  in  easy  reach  of  railroad  trains,  the  thirst 
for  public  plunder  is  stimulated  to  earlier  manifestation  by  the 
quicker  advent  of  "fences"  for  the  swag.  Thus,  the  broad  prai- 
ries of  the  Dakotas  were  settled  in  downright  earnest,  only  when, 
so  to  speak,  there  was  but  a  step  from  the  palace  car  to  the 
"shack."  Towns,  counties  and  school  districts  generally  paid 
their  obligations  in  "orders,"  which  were  hawked  about  and  sold 
at  a  roaring  discount.  Such  "orders,"  be  it  remembered,  are 
warrants  duly  signed  and  countersigned  by  the  proper  officers 
of  town,  city,  county  or  school  district,  and  drawn  upon  the 
treasurer  of  such  municipal  subdivision  in  favor  of  the  respective 
payees.  No  Dakota  order  in  the  early  days  drew  less  than  7 
per  cent  interest,  and  10  per  cent  was  not  uncommon.  Orders 
when  presented  to  the  treasurer  for  payment,  were  by  him  stamped 
"Not  paid  for  want  of  funds,"  or  with  like  legend,  and  thence 
forward  bore  interest  until  paid.  School  orders  generally  sold 
at  a  greater  discount  than  county  or  city  orders,  as  being  more 
local  and  subject  to  more  contingencies  in  point  of  revenue  to 
pay  them  with.  County  orders,  as  good  in  fact  as  bonds  of  the 
United  States,  were  often  sold  at  85  cents  on  the  dollar  of  their 
face,  or  even  less,  while  90  cents  on  the  dollar  of  face  value  was 
considered  a  fair  price  to  get  for  the  orders  of  counties  of  un- 
questioned solvency — orders  sure  to  be  paid  in  eighteen  months 
or  thereabouts,  with  7  per  cent  interest  from  the  date  of  their 
presentation  for  payment. 

Professors  and  others  desiring  light  on  "the  incidence  of 
taxation"  seldom  consider  cases  such  as  are  afforded  by  orders 
like  those  mentioned;  but  I  will  add,  for  their  benefit,  that  in 
such,  as  in  many  other  cases,  the  "incidence,"  or  where  the  tax 
represented  by  the  discount  on  such  orders,  finally  alights,  is 


122  HERTIG    ON    TAXATION. 

not  to  be  settled  off-hand  by  the  application  of  any  ready-made 
or  even  of  any  re-made  theory.  Most  of  those  orders  were  is- 
sued in  payment  of  fees  and  services  according  to  a  scale  or 
schedule  fixed  by  law,  and  in  the  expectation  of  payment  for 
the  same  in  cash.  The  county  therefore,  or  other  subdivision, 
found  in  these  cases  a  par  market  for  orders,  and  lost  directly 
only  such  part  of  the  interest  on  the  same  as  might  have  been 
saved  by  a  better  way  of  getting  and  using  credit.  No  juror 
failed  to  serve,  or  witness  in  criminal  cases  to  attend,  or  officer 
to  officiate,  because  of  payment  in  orders.  Counties  paid  in  the 
aggregate  considerable  sums  as  a  bounty  for  killing  gophers ; 
and  the  tails  of  these  animals  were  taken  as  sufficient  voucher  for 
their  death,  and  when  presented  to,  and  counted  by,  the  county 
auditor,  were  the  basis  of  bounty  warrants,  or  orders,  at  so 
much  per  tail,  as  fixed  by  law.  No  complaint  was  ever  made 
that  gopher  mortality  was  in  any  way  lowered  by  the  discount 
on  county  orders.  There  was  always  some  bank  or  banker  will- 
ing to  buy,  or  if  no  bank  or  banker,  somebody  with  a  little  money 
of  his  own,  or  somebody  with  a  moneyed  connection  "below" 
would  step  in  to  save  the  situation.  You  shall  find  more  than 
one  old  banker,  more  than  one  old  other  citizen,  to  tell  you  that 
the  money  out  of  which  he  got  the  most  good  was  borrowed 
long  ago  at  2  per  cent  a  month,  or  even  at  a  higher  rate.  So 
in  the  times  of  these  orders  there  was  an  all-round  distribution 
of  profits  that  delighted  everybody,  and  a  scattered  incidence  of 
taxation  which  nobody  curiously  considered. 

It  was  different  with  certain  other  orders.  Contracts  for  pub- 
lic work,  and  especially  for  school-houses,  showed  in  prices  asked 
and  obtained  the  full  amount  of  the  anticipated  discount,  and 
something  more.  That  there  was  some  sort  of  a  cash  market 
for  school  orders  was  the  cause  that  not  infrequently  a  school 
district  was  organized  out  of  territory  where  there  were  prac- 
tically no  school  children — organized  for  the  sole  present  pur- 
pose of  getting  a  roaring  builders'  profit  and  for  taking  a  roar- 
ing discount.  He  who  would  buy  the  orders  of  the  new  district 
encouraged  him  who  would  build  the  new  school-house,  soon  to 
ornament  the  raw  prairie,  and  with  the  half  dozen  shacks  of  the 
school-house  promoters,  to  constitute  the  entire  architectural 
display  in  all  the  district.  The  chief  of  the  promoters  got  the 
building  contract  from  the  zealous  allies  whom  he  had  induced 
to  become  school  officers,  and  in  due  time  had  his  and  their  profits 
in  cash,  while  the  buyer  of  orders  had  them,  and  his  prospective 
profits — on  paper.  For,  as  is  well  known,  the  holder  of  a  mere 
warrant,  or  order,  does  not  hold  something  protected  in  any 
way  by  purchase  "in  good  faith  and  without  notice,"  as  does 


HERT1G    ON     TAXATION.  123 

the  holder  of  commercial  paper  or  negotiable  bonds ;  but  as  hold- 
er of  warrant  or  order,  he  is  subject  to  any  and  every  defense 
that  the  municipality  could  make  against  him  to  whom  the  war- 
rant was  originally  issued.  The  school  districts  thus  perma- 
nently and  corruptly  organized,  survived  after  their  first  boards 
of  officers  and  directors  had  built  and  retired  from  office.  Set- 
tlers came  in  and  found  a  school-house  waiting  for  them ;  they 
needed  a  school-house,  but  perhaps  did  not  want  the  kind  of  one 
they  found — certainly  not  at  any  sucn  magnificent  price  as  that 
represented  by  unpaid  orders  outstanding.  Sometimes  they 
grumbled,  burdened  themseKes  with  heavy  taxes,  and  paid  for 
tne  school-house;  often  they  grumbled,  employed  attorneys  and 
put  up  a  stout  defense  against  the  holder  of  orders, — with  a  suc- 
cess of  course  in  proportion  to  their  tenacity  and  the  complete- 
ness with  which  they  contrived  to  bring  out  the  facts. 

in  general,  it  may  be  said  that  new  counties  are  poorly 
financed.  They  need  so  many  things  to  be  built  from  the  ground 
up, — roads,  bridges  and  public  buildings,  that,  credit  on  any 
terms  co-operating,  it  is  not  surprising  to  find  new  counties, 
controlled  often  by  inexperienced  and  enthusiastic  men,  taking 
a  faster  pace  than  is  good  for  them,  creating  some  things  that 
they  could  get  on  without,  and  particularly  putting  more  money 
into  certain  kinds  of  improvements  than  they  should  in  their 
first  decade  or  first  twenty  years  of  county  organization.  Hence, 
generalization,  as  to  the  significance  of  particular  features  in  the 
rate  and  amount  of  taxation  in  any  new  county,  should  be  qual- 
ified by  careful  attention  to  its  situs,  its  physical  geography,  the 
general  character  of  its  population,  the  date  of  its  organization,  the 
half  dozen  men  who  probably  control  its  politics  and  expendi- 
tures, the  county  debt  they  have  created,  etc.  With  a  prosperous 
agricultural  and  relatively  insignificant  city  development,  as  in 
the  case  of  the  old  and  low-taxed  group  of  counties  above  anal- 
yzed, the  special  influence  and  facts  to  be  weighed  in  consider- 
ing the  financial  side  of  new  counties — are  pretty  well  canceled 
out  in  the  lapse  of  twenty  years  or  so  from  the  date  of  county 
organization :  debts  will  have  been  paid,  and  the  public  extrav- 
agance that  often  waits  on  booming  will  have  disappeared.  Here 
and  there  the  trail  of  a  new  court  house  will  be  well  marked, 
if  such  building  is  rapidly  paid  for;  unusual  floods  may  impart 
their  own  swelling  to  the  road  and  bridge  account,  but  the  main 
current  of  county  expenses  will  flow  on  with  much  smoothness 
and  uniformity. 

In  comparing  county  wilh  cour.ty  as  regards  revenue  and  ex- 
penditure in  a  state  so  diversified  as  Minnesota,  and  where  the 
assessed  values  of  farm  lands  vary  by  so  considerable  a  margin, 


124  HERTIG    ON    TAXATION. 

it  does  not  necessarily  follow  that  the  lowest  rate  of  taxation  con- 
clusively determines  that  there  is  better  financial  management 
where  it  prevails  than  in  certain  other  counties  where  the  rate  is 
even  considerably  higher.  Thus  Dodge  county  with  her  ban- 
ner low  rate  of  16.8  mills  has  a  slightly  greater  taxed  area  than 
Anoka  county, — 277,050  acres  as  against  Anoka's  267,313.  But 
Dodge  lands  are  valued  at  $13.55  Per  acre>  and  Anoka's  at  only 
$5.56  per  acre.  Besides  Anoka  county  as  a  whole  has  a  greater 
city  burden  than  Dodge, — city  valuation  $758,164,  as  against 
Dodge's  city  valuation  of  $534,679.  -  But  Anoka  county,  with 
a  rate  of  33.4  mills  does  not  levy  taxes  in  as  great  an  aggregate 
as  Dodge  county  with  16.8  mills,  or  about  halt  of  Anoka's  rate : 
Anoka  county  levies  $86,315.11 ;  Dodge,  $87,268.70. 

Again,  taking  the  most  typical  of  the  counties  which  have  age, 
high-priced  lands,  low  rates  of  taxation,  and  preponderating 
agricultural  interests,  we  find  that  in  their  aggregate  valuations 
the  percentage  of  personal  property  is  somewhat  lower  than  the 
average  percentage  for  the  state,  and  in  some  instances  consid- 
erably lower.  Thus  Carver's  percentage  is  16,  Dakota's  11.4, 
Dodge's  17.3,  McLeod's  16.5,  Olmsted's  18.6,  Sibley's  15.  Blue 
Earth,  with  high-priced  lands  and  low  taxes  can  make  some  claim 
of  being  an  urban  county,  since  only  five  other  counties  lead  her 
in  their  assessed  values  of  town  lots  and  city  property,  and  her 
city  property  valuation  is  nearly  one-fourth  of  her  aggregate, 
while  her  percentage  of  personal  property,  16.4,  is  close  to  the 
average  for  counties  otherwise  in  her  class.  Houston,  with  low 
taxes,  decided  agricultural  preponderance,  and  lands  valued  at 
only  25  cents  per  acre  above  the  average  for  the  state,  shows 
a  higher  percentage  of  personal  property  than  any  other  of  the 
low  taxed  counties — 23  per  cent.  But  she  has  almost  the  same 
taxed  area  as  Dakota;  and  if  her  lands,  like  the  latter  county's, 
were  assessed  at  $14.66  per  acre,  instead  of  at  $7.50,  her  per- 
centage of  personal  property  would  be  only  14.  Tangible  per- 
sonal property  is  valued  uniformly  throughout  the  state,  accord- 
ing to  the  scale  adopted  in  the  state  board  of  equalization,  while 
lands,  as  already  shown,  differ  in  assessed  value  from  each  other 
in  the  different  counties  by  all  sorts  of  percentages.  Dakota  and 
Houston,  just  compared,  are  of  about  the  same  size,  and  list  near- 
ly the  same  amounts  of  personal  property,  $901,442  and  $919,467 
respectively;  yet  Dakota's  percentage  is  11.4,  Houston's  23. 

The  three  distinctively  city  counties  of  the  state,  Hennepin, 
Ramsey  and  St.  Louis,  have  an  aggregate  valuation  of  $250,- 
631,370,  which  is  five-twelfths  of  the  valuation  of  the  entire  state. 
These  three  counties,  then,  pay  five-twelfths  of  the  taxes  that  are 
yielded  to  the  state  treasury  by  direct  levy.  Including  their  local 


HERTIG    ON     TAXATION.  125 

taxes  they  pay  45  i-io  per  cent  of  all  the  taxes  levied  within  the 
state, — that  is  to  say: 

Aggregate  levy  for  all  purposes  within  the  state.  . .  .$16,269,671 
Aggregate  levy  in  Hennepin,  Ramsey  and  St.  Louis.  7,341,271 
The  assessed  personal  property  in  Hennepin  amounts  to  21 
per  cent  of  the  whole  assessment  in  that  county ;  in  Ramsey,  to 
17.7  per  cent;  in  St.  Louis,  to  16  per  cent;  and  the  average  in 
the  three  counties  is  i8^4  Per  cent,  as  against  an  average  ot 
173-10  per  cent,  for  the  other  counties  in  the  state.  When  the 
high  valuations  of  certain  lands  in  the  cities  are  considered  (see 
ch,  XIII,  below),  it  would  seem  that  in  Minnesota,  at  least, 
most  kinds  of  personal  property  in.  her  larger  cities  fare  rather 
worse  at  the  hands  of  the  assessor  than  does  personal  property 
in  the  rural  counties. 


CHAPTER  X. 


Foundation  of  Great  Northern  Railway — A  romance  in  opportunity — From 
1879  to  1902 — From  scant  hundreds  to  long-  thousands — From  a  golden 
gratuitous  nest-egg  to  a  brood  yielding  more  than  $200,000,000  of 
profits — Successive  steps  in  this  production  of  wealth. 


Thrift  that  waxes  fat  and  kicks  must  not,  as  Prof.  Perry  at- 
tests, be  taxed  at  any  more  on  his  dollars,  however  he  came  by 
them,  than  haggard  near-the-rocks  on  the  suppositions  dollars 
which  the  assessor  has  set  down  to  him,  and  which  this  year  shall 
yield  no  tax  payment,  but  rather  the  beginning  of  a  tax-title.  The 
professors,  in  general,  are  good  to  wealth;  but  wealth  is  often 
so  ungrateful  as  to  anger  and  perplex  their  souls  by  stealing 
or  begging  franchises,  and  by  leaving  then  a  disportionately 
light  tribute  with  the  tax-gatherer.  I  contribute  herewith  for 
their  benefit  and  for  those  of  them  who  study  problems  of  tax- 
ation and  government,  a  study  in  sudden  and  colossal  growth  of 
profits — of  universal  interest  but  peculiarly  pertinent  to  the  peo- 
ple of  Minnesota  and  of  North  Dakota,  who  have  largely  been 
the  power  behind  the  scenes  in  the  creation  of  those  profits.  1 
refer  to  the  fortunes  made  or  increased  by  the  operation  and 
manipulation  of  the  Great  Northern  Railway  Company,  and  of 
its  predecessor  and  lessor,  the  St.  Paul,  Minneapolis  and  Mani- 
toba Railway  Company.  None  of  this  is  ancient  history.  Go- 
ing back  only  a  little  more  than  twenty  years  from  the  present 
date,  back  to  1879,  we  come  to  the  '"Manitoba"  company,  as 
the  Great  Northern's  predecessor  was  generally  called,  just  en- 
tering upon  an  inheritance  of  a  little  less  than  600  miles  of  rail- 
road, built  with  more  or  less  of  pain,  tribulation  and  financial 
disappointment  by  its  predecessors,  with  which  I  have  now  noth- 
ing to  do.  The  boom  of  the  Red  River  Valley  of  the  North  was 
about  to  begin ;  and  the  Manitoba  company  was  destined  to  profit 
by  that  boom  out  of  sight  more  largely  than  any  other  person 
or  corporation.  The  Manitoba  began  with  a  bonded  debt  of  some- 
thing more  than  sixteen  millions  of  dollars  and  a  capital  stock 
of  fifteen  millions.  We  need  not  inquire  to  what  extent  this 


HERTIG    ON     TAXATION.  127 

original  capital  was  "sugar,"  "velvet,"  or  "water,"  as  the  zero 
capital  from  which  value  is  expected  to  grow  is  variously  called: 
the  profits  realized  are  sc  stupendous,  that  the  figures  are  affected 
but  a  little  in  percentage  by  assuming,  for  the  sake  of  argument, 
that  the  original  capital  was  paid  in,  dollar  for  dollar  in  cash. 
Let  it  be  so  assumed. 

Probably  no  more  valuable  nucleus  of  what  was  to  develop 
into  a  great  railroad  system  was  ever  acquired  by  any  individual 
or  syndicate  than  that  which  came  into  the  hands  of 'James  J. 
Hill  and  his  friends  in  1879,  and  was  launched  in  that  year,  as 
already  stated,  under  the  corporate  name  of  the  St.  Paul,  Min- 
neapolis and  Manitoba  Railway  Company.  Waiving  inquiry  into, 
the  actual  consideration  given  by  Hill  and  his  friends  for  the 
control  of  these  properties,  we  follow  the  system  from  its  initial 
560  miles,  reaching,  in  essential  summary,  from  St.  Paul  and 
Minneapolis  to  St.  Vincent — follow  it  to  656  miles  'in  1880, 
702  miles  in  1881,  926  miles  in  1882,  and  1,203  miles  in  1883, — 
the  figures  for  the  years  1880  to  1883,  inclusive,  beins:  the  aver- 
age mileage  in  those  respective  years  operated. — Poor's  Man- 
ual for  1884,  p.  749.  The  boom  which  began  for  practically 
all  the  United  States  in  1879  continued  for  the  Red  River  Val- 
ley well  into  1882,  for  St.  Paul  and  Minneapolis  several  years 
longer,  and  for  transportation  purposes  continued  practically, 
though  not  uniformly  nor  without  abatement,  until  after  1892. 
The  Manitoba  system  reached  the  high  level  mark  of  boom  pros- 
perity in  1883, — its  gross  earnings  for  that  and  the  preceding- 
year,  due  as  well  to  high  rates  as  to  the  boom,  having  reached 
a  little  more  than. $7,000  per  mile!  What  this  means  may  be 
realized  when  it  is  stated  that  the  1,500  miles  of  road,  speak- 
ing roundly,  comprising  the  Chicago,  St.  Paul,  Minneapolis  and 
Omaha  system,  owned  by  the  Northwestern  and  operated  through 
a  populous  and  prosperous  country  into  like  cities,  earned  <rross, 
per  mile,  in  the  tremendous  traffic  year  of  1901  just  $7,111.67. 

In  1882,  the  Manitoba  paid  its  first  dividend— 6>4  per  cent 
en  $15,000,000  of  capital  stock.  In  1883,  after  the  stock  had 
been  swelled  to  $20,000,000  by  a  gift  issue  of  $5,000,000  to  the 
stockholders  in  stock  certificates,  it  paid  a  dividend  of  9^  per 
cent  on  the  whole  $20,000,000  of  capital.  Besides  paying  these 
dividends  it  carried  in  cash  balances  or  to  the  credit  of  its  sink- 
ing fund  several  millions  more.  But  we  are  not  concerned  with 
its  internal  operations,  except  in  so  far  as  they  took  the  form  of 
distribution  to  its  stockholders.  Meanwhile,  market  quotations 
of  the  stock,  while  it  remained  at  $15,000,000,  had  risen  from  a 
fiVure  considerably  below  par  to  the  high  water  mark  of  166. 
Whether  anybody  on  the  "inside"  profited  by  the  intended  new 


128  HERTIG    ON    TAXATION. 

issue  of  -$5,000,000  to  make  a  large  fortune  by  selling  short,  I  am 
not  informed.  This,  too,  is  beside  the  main  question,  which  is 
the  amount  of  profits  confessed  by  public  distribution.  As  was 
inevitable,  the  market  price  of  Manitoba  stock,  under  the  influ- 
ence of  the  new  issue  thereof  and  of  the  bond  issue  mentioned 
below,  sagged  way  down.  For  the  markets  had  not  then  taken 
the  measure  of  Minnesota's  and  East  North  Dakota's  sustain- 
ing power  for  railways ;  nor  had  they  got  entirely  accustomed  to 
Mr.  Hill  -as  an  economical,  though  daring,  manager.  Therefore 
the  bear  features  of  the  situation  brought  about  by  the  new 
issue,  etc.,  were  worked  too  hard,  and  the  stock  went  at  times 
below  par.  In  the  year  1884  its  highest  figure  was  99,  and 
under  the  pressure  of  bad  money  markets  it  went  that  year  as 
low  as  76%.  In  1885,  its  high  mark  was  110^/2,  its  low  79%. 
It  should  be  added  that  the  additional  $5,000,000  of  stock  (based 
on  excellent  value,  but  all  water  or  "velvet"  from  the  stockhold- 
ers' standpoint),  was  not  the  only  "bear"  feature  from  the  stock 
exchange  point  of  view,  but  that  $10,000,000  of  6  per  cent.  50- 
year  bonds,  dated  May  I,  1883,  "were  issued  to  stockholders 
in  the  nature  of  a  scrip  dividend  at  the  rate  of  10  per  cent,  of 
their  par  value!" — POOR'S  MANUAL  for  1884,  p.  750.  These  bonds, 
still  outstanding  and  guaranteed,  principal  and  interest,  by  the 
Great  Northern,  are  now  worth  at  least  140. 

The*  dividends  of  1882  and  1883  aggregating  16  per  cent, 
brought  the  average  up  to  4  per  cent,  per  annum  for  the  four 
years  that  the  road  had  been  practically  in  operation.  After 
1883,  Manitoba  stock  was  put  on  a  regular  6  per  cent,  dividend 
basis,  and  so  continued  as  well  before  as  after  the  999-year 
lease  of  the  system  to  the  Great  Northern  Railway  Company, 
made  in  1890, — continued  till  the  $20,000,000  of  Manitoba  stock 
on  which  the  Great  Northern,  as  one  of  the  conditions  of  the 
lease,  guaranteed  6  per  cent,  dividends  was  bought  up  by  the 
Great  Northern  through  an  issue  of  its  own  stock,  as  explained 
below.  These  dividends,  then,  may  be  considered  as  a  fairly  sat- 
isfactory regular  profit,  and  I  shall  take  no  account  of  them  when 
I  come  to  estimate  the  extra  profits  taken  by  Mr.  Hill  and  his 
friends  as  the  result  of  their  operations. 

Mention  has  been  made  of  the  condition  of  the  Great  North- 
ern Railway  Company  in  1890.  In  1900,  at  the  close  of  its  fiscal 
year,  June  30,  the  $15,000,000  of  bonds  which,  as  we  have  seen, 
it  negotiated  in  1892  at  72^2  cents  on  the  dollar,  and  which 
were  sold  subject  to  the  privilege  of  retiring  them  at  par  after 
a  certain  date — had  been  paid  off  and  cancelled.  They  were  in 
fact  called  for  payment  prior  to  September  i,  1898,  and  ceased 
to  bear  interest  after  that  date.  The  operation  of  retiring  them 


HERTIG    ON     TAXATION.  129 

was  financed  through  an  issue  of  Great  Northern  preferred  stock 
to  the  amount  of  $25,000,000,  for  which  stockholders  were  given 
the  privilege  of  subscribing  at  par.     Payment  for  the  stock  could 
be  made  in  cash,  or  in  said  bonds  at  par,  or,  to  the  extent  of 
40   per   cent,   of   the  subscription,    in   stock   of   the   Seattle  and 
Montana  Railroad   Company,   whose  stock  the  Great   Northern 
bought  up  with  a  part  of  the  proceeds  of  said  issue  of  preferred 
stock.     The  Seattle  and  Montana  had  been  quietly  promoted  by 
the  Great  Northern,  and  advances  to  it  had  been  made  by  the 
latter  "during  a  series  of  years"    (Poor's  Manual  for   1898,  p. 
460),  to  an  amount  aggregating,  with  interest,  March   I,   1898, 
"about  $11,300,000,"  moneys  "which  would  otherwise  have  been 
subject  to  distribution   in   the   form  of  dividends  among  Great 
Northern  stockholders."     But  all  the  stock  of  the  Seattle  and 
Montana,  $12,500,000,   in  consideration  of  said  advances,  or  in 
discharge  of  the  indebtedness  growing  out  of  them,  was  turned 
over  to  a  trust  company  for  the  benefit  of  the  Great  Northern 
stockholders,   for  ratable  distribution  among  them,  and  figured 
as  worth  80  cents  on  the  dollar,  at  the  time  of  the  issue  of  said 
Great   Northern   preferred    stock.      That   issue    aggregated,   as 
aforesaid,  $25,000,000,  or  just  enough  to  retire  the  $15,000,000 
of  4  per  cent,  bonds  at  par,  and  the  $12,500,000  of  Seattle  and 
Montana  stock  at  80  cents  on  the  dollar.     But  there  had  already 
been  issued  $25,000,000  of  preferred  stock,  hence  each  holder  of 
the  prior  issue  of  Great   Northern  preferred  had  the  right  to 
double  his  holdings  by  taking  as  much  of  the  new  as  he  already 
had  of  the  old.     And  he  held,  or  the  Manhattan  Trust  Company- 
held   for  him,  50  cents  in  the  capital  stock  of  the  Seattle  and 
Montana  for  every  dollar  he  owned  of  the  old  Great  Northern 
preferred^  and  this  fifty  cents  paid  forty  cents  on  each  dollar  of 
the  new   preferred  stock  for  which  he  subscribed.     If,  too,  he 
had  subscribed   in   proportion  to  his  holdings  of  old   preferred 
stock  for  said  $15,000,000  of  bonds  at  72.^/2  cents  of  their  par 
value  and  still  held  his  pro  rata  amount  thereof,  he  got  his  new 
preferred  stock  by  simply  exchanging  therefor  his  bonds  at  par 
and  his  Seattle  and  Montana  at  80  cents  on  the  dollar,  without 
paying  any  cash  in  the  transaction.     Meanwhile  the  old  issue  of 
$25,000,000  preferred  Great  Northern  had  not  been  idle.    Origin- 
ally $20,000,000,  and  subsequently  increased  $5,000,000  more  for 
making  additions  and  betterments,   it  began  to  draw  dividends 
on  November   I,   1890,  quarterly,  at  the  rate  <»f  4  per  cent,  per 
pnnum,  and  after  the  I  per  cent,  dividend  of  February  I,   1891, 
at  the  rate  of  5  per  cent,  per  annum  until  August,   1897,  when 
quarterly  dividends  of   1^/2   per  cent,  or  6  per  cent,  per  annum 
began,  and  continued  until  Nov.  I,  1898,  when  the  quarterly  in- 


130  HERTIG    ON     TAXATION. 

stallment  (now  on  $50,000,000  instead  of  a  lower  rate  on  $25,- 
000,000)  was  raised  to  1^4  per  cent,  or  7  per  cent  per  annum. 
The  retiring  of  the  $15,000,000  of  bonds  and  the  $12,500,000 
of  the  Seattle  and  Montana  stock  was  completed  as  of  the  date 
August  I,  1898,  since  the  first  quarterly  dividend  on  the  new 
stock  was  paid,  as  aforesaid,  on  Nov.  i,  1898.  But  prior  to  the 
issuing  of  the  $25,000,000  of  new  preferred  stock,  the  old  pre- 
ferred had  commanded  a  handsome  premium  in  the  markets  of 
the  world.  Even  as  a  5  per  cent,  stock,  it  was  at  a  premium.  In 
the  flush  times  of  1892,  December  29th  of  that  year,  for  in- 
stance. Great  Northern  preferred  sold  in  New  York  at  133.  In 
the  evil  times  even  of  1893  and  1894.  it  sagged  less  relatively  than 
most  of  the  other  stocks.  August  30,  1894,  it  was  worth  101  ; 
but  the  Great  Northern's  gross  earnings  for  the  fiscal  year  end- 
ing June  30,  1894,  $3,013.14  per  mile,  were  25  per  cent,  less  than 
for  the  previous  year,  and  31  per  cent,  less  than  for  the  year 
ending  June  30,  1892.  However,  it  gradually  recovered,  sell- 
ing, Nov.  2,  1895,  at  123^,  and  in  the  scary  days  just  preced- 
ing the  November  elections  in  1896,  at  115.  February  2,  1897, 
it  was  worth  121.  As  it  was  a  stock  "closely"  held,  sales  of  it 
were  small  and  infrequent,  as  compared  with  the  so-called  active 
stocks.  A  novice  might  conclude  that  the  announcement  of  issu- 
ing $25,000,000  on  top  of  the  like  original  amount  would  depress 
the  price  of  Great  Northern  shares.  Just  the  contrary  took  place. 
The  right  of  the  old  stockholders  to  subscribe  for  the  new  be- 
came at  once  commercially  valuable.  Old  shares  carrying  what 
the  street  calls  "rights"  began  to  climb  in  value,  as  soon  as  the 
intended  new  issue  was  announced, — in  fact,  on  "inside"  knowl- 
edge of  such  issue  before  it  was  announced.  From  135  at  about 
the  end  of  January,  1898,  the  stock  in  less  than  a  week,  seemingly 
on  such  secret  tip,  jumped  to  16?,  and  with  some  relapses,  on 
profit-taking  and  the  beginning  of  trouble  with  Spain,  climbed 
gradually  to  180  on  July  I,  1898,  the  last  day,  when  it  was  sold 
with  "rights."  On  July  2,  1898,  the  stock  dropped  to  122,  the 
first  market  price  on  the  basis  of  a  total  issue,  of  $50,000,000. 
including  old  and  new.  Thus  old  stockholders  who  subscribed 
for  bonds  at  72^  cents  had  been  receiving  their  4  per  cent,  inter- 
est on  the  face  value  of  the  bonds,'  or  about  6  per  cent,  on  the 
money  actually  invested,  and  on  July  I,  1898,  say  six  years 
after  the  investment,  assuming  them  then  to  hold  their  stock  on 
which  they  had  J)een  receiving  dividends  as  above  mentioned, 
could  get  a  premium  of  $80.00,  on  each  $100.00  share  of  stock, 
and  the  bonds  being  then  worth  par  could  get  a  cash  bonus  of 
$27.50  on  each  $72.50  that  they  had  invested  in  the  bonds,  which 
bonus  is  almost  40  per  cent,  of  the  capital  originally  invested  in 


HERTIG    ON     TAXATION.  131 

chc  bonds.  If,  however,  the  stockholder  stood  pat  with  his  old 
stock,  and  took  his  allotment  of  the  new, — then,  assuming  him  to 
sell  on  July  2,  he  would  have  put  on  the  market  with,  say  each 
$1,000  of  his  old  stock,  a  like  amount  of  new  stock  for  which 
latter  he  would  have  surrendered  bonds  of  the  face  value  of 
$600.00  and  Seattle  and  Montana  stock  of  the  face  value  of 
$500.00.  But  the  $600.00  of  bonds  cost  him  only  $435.00,  and 
his  Seattle  and  Montana  was  in  fact  a  dividend  on  his  Great 
Northern  stock.  Moreover,  selling  his  $1,000  of  old  stock  and 
the  like  amount  of  new  for  122,  he  would  have  received  $2,440.00 
for  the  lot.  Assuming  (but  not  warranting)  that  his  old  stock 
cost  him  par,  he  then,  on  an  original  investment  of  $1,000  in 
.stock  and  $435.00  in  bonds,  on  which  he  had  had  good  dividends 
and  good  interest,  would  have  made  a  premium  of  $1,005.00 
over  and  above  dividends  and  interest.  Assume,  however,  that 
he  did  not  sell,  but  retained  all  his  stock,  old  and  new,  he  would 
thus  have  made  a  still  higher  premium  by  staying  for  a  later 
market.  Within  sixty  days  from  July  2,  1898,  when  his  stock 
was  122,  it  rose  to  136.  In  1899,  it  was  never  below  142,  and 
was  generally  above  that  figure.  In  1900  it  ranged  between  144 
and  190.  In  the  meantime,  practically  as  soon  as  the  second 
$25,000,000  of  preferred  stock  had  been  issued,  a  third  $25,- 
000,000  was  authorized.  This  was  for  the  purpose  of  purchasing 
the  outstanding  capital  stock  of  the  St.  Paul,  Minneapolis  and 
Manitoba  Railway  Company,  at  whose  head  Hill  first  grew  to 
reputation,  and  which  was  leased  on  February  I,  1890,  to  the 
Great  Northern  Company  for  a  period  of  999  years  from  that 
date.  One  of  the  conditions  of  the  lease  is  that  the  lessee  guar- 
antees the  payment  of  6  per  cent,  dividends  per  annum  on  the 
$20,000,000  of  stock  of  the  Manitoba  Company.  In  retiring,  there- 
fore the  Manitoba  stock  at  the  rate  of  $125.00  of  Great  Northern 
stock  for  each  $100.00  of  the  former,  Hill  did  a  good  thing 
in  a  twofold  sense :  Firs!,  the  Great  Northern  converted  an  an- 
nual fixed  charge  of  $1,200,000  (6  per  cent  on  $20,000,000)  into 
a  matter  optional  with  the  Great  Northern.  It  may  pass  or  re- 
duce a  dividend  on  its  own  stock,  practically  at  the  directors' 
pleasure,  whereas  it  must  pay  a  guaranteed  dividend  on  the  Man- 
itoba stock  so  long  as  the  latter  was  outstanding ;  second,  ex- 
changing $25,000,000  of  stock  for  $20,000,000  of  a  different  obli- 
gation is  one  of  the  ways  of  "loading,"  as  they  call  it.  This  is  ex- 
tremely convenient  for  a  prosperous  and  growing  company ;  it 
helps  to  consume  an  awkward  surplus  which,  when  too  large,  al- 
ways inspires  envy  and  invites  attack.  Thus,  when  one  pays  out 
in  dividends  $1,750,000  per  annum  (7  per  cent  on  $25,000,000) 
as  against  $1,200,000  (6  per  cent,  on  $20,000,000)  his  company 


132  HERTIG     ON     TAXATION. 

is  to  all  appearance,  and  to  some  extent  in  fact,  $550,000  poorer 
at  the  end  of  a  year  than  it  would  have  otherwise  been.  The  ex- 
change of  Great  Northern  preferred  stock  for  Manitoba  stock  was 
substantially  completed  in  1899,  and  during  the  same  year  an  ad- 
ditional amount  of  Great  Northern  stock,  $15,000,000,  was  offered 
to  its  stockholders  at  par  and  issued  to  enable  the  company  to  ac- 
quire $7,500  ooo  additional  stock  of  the  Eastern  Railway  Co.  of 
Minn.,  and  to  buy  a  railway  system  centering  in  Spokane,  Wash., 
,  consisting  of  217  miles  of  track  and  presumably  the  ordinary 
rolling  stock  for  the  same.  These  lines,  the  principal  one  of 
which  was  known  as  the  Spokane  Falls  and  Northern  Railway, 
had  been  promoted  and  largely  built  by  -  -  Corbin,  who  is 

said  to  have  cleared  a  large  fortune  by  selling  to  the  Great 
Northern.  The  securities  of  the  Spokane  system  so  bought  ag- 
gregated, according  to  Poor's  Manual  for  1899,  p.  630,  $9,776,- 
200.00,  but  whether  this  sum  was  the  face  or  the  actual  purchase 
price  is  not  stated.  We  have  thus  followed  the  Great  Northern 
from  its  enforced  pause  in  what  used  to  be  called  "The  Great 
American  Desert" — in  its  successful  resumed  march  to  Puget 
Sound,  and  from  its  $20,000,000,  and  then  $5,000,000  more  of 
preferred  stock  to  further  increases  raising  its  aggregate  stock  to 
$90,000,000  at  an  early  date  in  1899,  and  this  without  breaking 
the  market  therefor  but  rather  the  contrary.  It  should  be  added 
here  that  a 'reserved  right  of  the  company  to  issue  $20,000,000 
of  common  stock  was  never  used,  and  has  been  permanently 
abandoned,  so  that  there  is  in  fact  but  one  class  of  Great  Northern 
stock ;  also  that  the  original  $20,000,000  of  this  stock  was  issued 
to  stockholders  of  the  St.  Paul,  Minneapolis  &  Manitoba  Com- 
pany for  fifty  cents  on  the  dollar,  they,  however,  surrendering  as 
additional  consideration  for  the  stock,  odds  and  ends  of  securities 
belonging  to  the  Manitoba  system,  and  having  an  aggregate  face 
vahie  of  over  $22,000,000.  These  securities,  whatever  their  real 
value  in  cost,  were  a  part  of  the  earnings  of  the  Manitoba  Com- 
pany, and  had  their  origin  largely  or  entirely  in  branch  roads  or 
other  properties  built  and  capitalized  by  the  Manitoba. 

The  Manitoba  and  its  successor,  the  Great  Northern,  have 
been,  for  railroad  companies,  very  close  corporations.  Hill  and 
his  friends  may  be  said  to  be  "it"  and  "they."  We  may  now  fig- 
ure approximately  some  of  their  open  and  palpable  extra  profits : 

In  the  year  1883,  extra  Manitoba  stock $  5,000,000 

In  the  year  1883,  9^2  per  cent  dividend  on  same.  .  .  .  475,000 
In  the  year  1883,  $10,000,000  6  per  cent  bonds  at  10 

cents  9,000,000 

In  the  year  1890,  50  per  cent,  rebate  on  20  millions 

G.  N.  stock.  ,  10,000,000 


HERTIG    ON    TAXATION.  133 

[This  $10,000,000  was  for  the  $22,000,000  of  se- 
curity which  the  Manitoba  system  had  earned 
extra.  See  p.  132,  above.] 

In  the  year  1898,  27^  cents  on  the  dollar,  account  of 
bonds  redeemed  at  par  which  they  got  for  72*^ 
cents — 27*^  per  cent  of  $15,000,000 4,125,000 

In  the  year  1898,  credit  on  new  issue  of  Great  North- 
ern stock  account  of  Seattle  and  Montana  secur- 
ities   10,000,000 

In  1899  stock  bonus  in  exchanging  $25,000,000  Great 

Northern  stock  for  $20,000,000  Manitoba  do....  5,000,000 

In  1900,  the  stockholders  were  given  the  privilege  of 
subscribing  at  par  for  $9,000,000  more  of  stock 
(i-io  of  a  new  share  for  each  share  of  their  prior 
holdings),  and  as  the  highest  market  price  which 
Great  Northern  stock  reached  in  1900,  was  190, 
this  subscription  privilege  was  worth  90  cents  on 
each  dollar  of  the  new  issue,  or  a  total  of 8,900,000 

An  additional  $1,000,000  of  stock  was  authorized  in 
1900  and  reserved  for  employes  to  purchase,  lim- 
ited to  those  drawing  salaries  of  less  than  $3,000, 
and  need  not  here  be  further  noticed.  In  1901, 
Mr.  Hill  cut  another  very  large  "melon,"  in  the 
shape  of  a  further  issue  of  stock  to  the  face  value 
of  $25,000,000,  and  for  which  stockholders  had  the 
privilege  of  subscribing  in  proportion  to  their  prior 
holdings.  But  in  offering  this  new  stock  Mr. 
Hill  told  them  that  the  Great  Northern  had  made 
permanent  additions  to  the  leased  Manitoba  sys- 
tem to  the  amount  of  $5,000,000  which  under  the 
lease  the  Great  Northern  was  entitled  to  have  re- 
imbursed, and  which  sum,  had  it  not  been  so  used, 
could  have  been  paid  to  them  in  dividends.  That 
therefore,  as  provided  in  the  lease,  the  Manitoba 
had  issued  for  said  additions  $5,000,000  in  bonds 
to  the  Great  Northern,  which  now  held  them  in 
its  treasury  for  the  benefit  of  its  stockholders,  and 
who  would  now  get  a  benefit  to  the  extent  of  that 
sum  by  a  credit  to  that  amount  pro  rata  on  their 
new  stock  subscriptions.  As  the  sum  so  rebated 
was  1-5  or  20  per  cent  of  the  entire  new  issue,  the 
cost  of  the  new  stock  to  the  prior  stockholders 
was  therefore  80  cents  on  the  face  value  of  the  same 
or  $80.00  per  share.  The  prior  stock  capital  hav- 
ing been  brought  up  to  a  round  hundred  millions 


134  HERTIG    ON     TAXATION. 

by  the  successive  issues  already  mentioned,  each 
holder  was  entitled  for  every  four  shares  that  he 
already  held  to  take  one  new  share  at  $80.00. 
Now  on  the  mere  rumor  of  some  such  melon  to 
be  cut,  Great  Northern  stock  sold  for  200  a  week 
before  the  official  announcement  was  made  ;  and  the 
day  of  the  announcement,  March  18,  1901,  the 
price  of  Great  Northern  stock  rose  to  208.  Now 
as  each  new  share,  costing-  the  old  stockholders 
only  $80.00  per  share  was  in  fact  worth  from 
$200  to  $208,  there  was  virtually  a  bonus  of  at 
least  $120,  in  each  new  share ;  that  is  to  say,  in  the 
whole  new  issue  of  $25,000,000,  the  virtual  bonus 

was 30,000,000 

The  above  figures  represent  only  the  more  open  and 
palpable  extra  profits  drawn  or  drawable  from 
the  Manitoba  and  Great  Northern  systems.  The 
original  stock  capital  of  $15,000,000,  assuming  it 
to  represent  that  much  money  actually  paid  in, 
has  been  drawing  both  in  its  old  and  in  its  new 
form  satisfactory  dividends,  six  per  cent  as  Mani- 
toba stock  after  1883,  and  seven  per  cent  since  its 
conversion  into  Great  Northern  stock  in  1899. 
The  original  capital  having  thus  been  taken  care 
of  in  a  highly  satisfactory  way  as  to  returns 
actually  received,  the  premium  on  it  in  March, 
1901,  taking  Great  Northern  stock  at  200,  was 
worth,  and  may  fairly  be  considered  an  extra 

profit  of  the  value  of 15,000,000 

We  may  now  recapitulate  these  extra  profits  drawn  or  draw- 
able  as  follows,  carrying  them  to  March  31,  1901,  a  2i-year 
period  of  profit: 

In  1883,  new  Manitoba  stock,  face $  5,000,000 

Six  per  cent.'  annual  dividends  on  same,  (computed 
for  convenience,  as  having  been  paid  in  block  on 
March  31  of  each  year,  instead  of  quarterly)  for 
the  years  1884  to  1898  inclusive,  compounded  at 

4  per  cent,  to  March  31,  1901 6,419,894 

Seven  per  cent,  dividends  on  said  stock  after  its  con- 
version into  Great  Northern  for  the  years  1899 

and    1900 — no   interest 700,000 

Nine  and  one-half  per  cent,  dividend  on  said  stock  for 

the  year  1883 475>°°° 

Compound  interest  for  17^  years  on  1883  dividend 

at  4  per  cent 468,730 


HERTIG    ON    TAXATION.  135 

The  1883  bonus  in  bonds 9,000,000 

Six    per    cent    interest    paid    on    same    compounded 

annually  at  4  per  cent 13,840,856 

Premium  of  40  per  cent  on  the   entire  $10,000,000 

of  said  bond  issue,  per  market  price,  March,  1901  4,000,000 

The  1890  rebate  on  Great  Northern  stock 10,000,000 

(This     item     being     represented     by     so     much 
stock,  the  dividends  and  interest  on  dividends 
must  figure  as  profits.) 
Dividend  of  I  per  cent,  paid  November  i,  1890,  and 

February  i,   1891 200,000 

Compound  interest  on  last  item  for  10  years 96,040 

Regular  quarterly  ij4  per  cent,  dividends  on  said  ten 

millions  from  May,  1891,  to  May,  1897,  inclusive  3,125,000 
Compound  interest  on  said  dividends  lumped  as  an- 
nual for  1892-96  inclusive  and  reckoned  from  Sep- 
tember 30  in  each  year 926,835 

Quarterly   dividends   of    il/2    per   cent,   paid   August 

and  November,  1897. 300,000 

Simple  interest  3^  years  on  dividends  paid  August 

and  November,   1897 42,000 

Simple   interest  2l/2   years    on    aggregate    dividends 

paid  in  1898 62,500 

Dividends  paid  in   1898 625,000 

Dividends  paid  in  1899 700,000 

Simple  interest  il/2  years  on  dividends  of  1899 42,000 

Dividends  paid  in  1900 700,000 

Six  months  interest  on  same 14,000 

Dividend  of  February  i,  1901 175,000 

Bonus  by  retiring  in  1898  $15,000,000  bonds.  .......  4,125,000 

Simple  interest  at  7  per  cent,  on  same  for  2l/2  years.  .  721,875 

The  1898  credit  by  Seattle  &  Montana  security 10,000,000 

Dividends  on  same,  1898,  i^4  Per  cent I75>ooo 

Interest  on  same,  2.y2  years 17,500 

Dividends  for  1899,  7  per  cent 700,000 

Interest  on  same  il/2  years 42,000 

Dividends  for  1900,  7  per  cent - 700,000 

Interest  for  six  months 14,000 

Dividends,  February  i,  1901 175,000 

The  face  value  of  bonus  for    exchanging    Manitoba 

stock  in  1899 5,000,000 

Dividends  on  said  five  millions  in  1899 350,000 

Dividends  on  said  five  millions  in  1900 350,000 

Dividends  on  said  five  millions  in  February,  1901 ....  87,500 
(A  small  fraction* of.  Manitoba  stock  not  having 


136  HERTIG    ON    TAXATION. 

been  exchanged,  the  items  pertaining  to  this 
last  $5,000,000,  should  be  diminished  about  2 
per  cent.  Omission  of  interest  hereupon  and 
of  compound  interest  from  various  items  above 
will  more  than  correct  this  inaccuracy.) 

Bonus  in  premiums,  or  market  value,  in  $9,000,000 

stock  issue  of  1900 8,900,000 

Bonus  of  like  kind  in  the  issue  of  1901 30,000,000 

Premium  bonus  by  1901,  in  original  issue  of  Manitoba 
stock,  leased  on  its  dollar  for  dollar  equivalent  in 
Great  Northern  stock 15,000,000 

But  we  have  not  included  in  the  above  the  premium 
or  rise  in  market  value  in  the  $5,000,000  issue  of 
Manitoba  in  1883,  nor  in  tne  $20,000,000  Great 
Northern  issue  of  1890  (one  half  of  which  issue 
was  by  way  of  a  credit  as  aforesaid),  nor  in  the 
$25,000,000  issue  of  1898  covering  the  bond  retir- 
ing and  the  Seattle  and  M.  deal,  nor  in  the  $5,000,- 
ooo  of  Great  Northern  stock  given  as  an  outright 
bonus  in  the  exchange  of  Montana  stock ;  and 
as,  in  March  1901,  the  market  value  of  all  these 
items  was  double  their  face,  we  must  therefore 
add  to  the  above  schedule  of  extra  profits 55,000,000 

We  have  neglected  also  the  first  increase  of  Great 
Northern  stock  ($5,000,000  for  additions,  etc.),  p. 
129,  and  the  $15,000,000  increase  in  1899  for  ac- 
quiring the  Spokane  system,  etc.,  p.  132;  hence  an 
additional  item  of  extra  profit  by  virtue  of  the 
market  value  in  March,  1901,  of 20,000,000 


Total    $208,270,730 

Should  it  be  objected  that  the  value  of  Great  Northern  stock 
at  200  as  per  sales  in  March,  1901,  is  too  high,  it  must,  of  course 
be  conceded  that  very  heavy  offerings  at  that  figure  would  not 
have  been  absorbed  by  the  market;  yet,  under  the  depres'sion  of 
the  May  panic  in  1901,  167^  was  the  lowest  figure  reached  by 
Great  Northern,  and  frequently  afterwards  during  the  year  it 
went  above  190.  We  may  be  sure  also  that  even  200  would  not 
buy  a  controlling  interest.  It  may  be  mentioned  here  that  the 
"common"  stock  of  the  Northern  Pacific  on  its  reorganization  in 
1896  was  fixed  at  $80,000,000,  and  that  half  of  this  was  offered 
to  the  Great  Northern  if  it  would  guarantee  the  payment  of  in- 
terest on  the  new  bond  issues  of  its  former  rival.  This  offer  was 
accepted  and  the  stock  would  have  been  .delivered  if  the  supreme 


HERTIG    ON    TAXATION.  137 

court  of  the  United  States  had  not  decided  in  the  Pear  sail  case 
that  such  transaction  would  have  virtually  made  a  consolidation 
of  the  two  roads,  was  in  violation  of  the  statutes  and  policy  of 
Minnesota,  and  hence  could  not  be  legally  consummated.  Here 
would  have  been  at  least  $40,000,000  more  to  add  to  the  already 
extra  profits  of  Mr.  Hill  and  his  friends.  In  estimating  the  ex- 
tra profits  as  above  no  notice  is  taken  of  townsite  opportunities 
and  other  avenues  of  profit  which  the  absolute  control  of  a  rail- 
way system  gives  to  its  chief  and  his  intimates.  Knowledge  in 
advance  of  the  time  and  amount  of  issue  of  the  different  blocks 
of  capital  stock  above  mentioned  could  have  been  turned  to  im- 
mense advantage  by  quiet  buying  and  selling  at  the  right  times. 

The  present  enormous  financial  power  of  the  Great  Northern 
can  perhaps  be  best  appreciated  from  the  physical  side  by  noting 
a  few  of  the  things  which  it  does  with  scarcely  a  ripple  in  its 
financial  current.  It  spends  in  1901,  $5,000,000  in  permanent 
improvements ;  opens  a  20  mile  cut-off  in  Montana,  and  builds 
thirty  miles  of  new  road  in  Washington  between  Fair  Haven  and 
Blanchard,  on  which  are  four  tunnels,  one  of  them  1,200  feet  long 
— builds  this  merely  to  avoid  the  sharp  curves  on  the  old  line 
between  those  points.  Troubled  with  washouts  between  Seattle 
and  Edmonds,  it  sets  the  road  on  piles  driven  in  the  water  beyond 
reach  of  future  landslides.  It  quietly  adds  new  feeders  to  the 
main  line  and  lengthens  the  feeders  already  built  .or  bought. 


CHAPTER  XL 

Masterful  men  the  ultimate  problem  of  taxation — Herein  of  modern 
plutocrats  and  Roman  emperors — Side  light  from  Napoleon  and  his 
career — The  art  of  R.  W.  Gilder  gives  him  place  with  kings — "Surely 
power  obliterates  moral  sense" — Modern  despots  in  general  tame  and 
petty  creatures  beside  the  Roman  Caesars — Nero  as  an  over-radical  tax- 
reformer! — The  modern  plutocrat  derided  in  literature  and  spurned  by 
his  fellow  anarchists — Sad  case  of  the  too  virtuous  plutocrat — Quay 
accuses  him  of  corrupting  politics — The  virtue  of  Mr.  Bliss  Perry, 
editor  of  the  Atlantic  Monthly,  intolerant  of  franchise-stealing — Prof. 
Hadley,  of  Yale,  over-illustrates  his  own  view  of  the  chief  use  of  edu- 
cation— Praise  for  the  plutocrat  from  Hubert,  Sumner  of  Yale — 
Orthodox  political  economy  as  a  substitute  for  religion — The  plutocrat 
not  individually  responsible  for  his  more  atrocious  crime — Case  where 
he  was  worse  than  a  red  anarchist — Not  generally  in  it  with  the  real 
thing  in  vice  or  ambition — Plutocracy  and  Nerocracy — Antinomy  of 
the  plutocratic  mind — In  re  James  J.  Hill,  J.  Pierpont  Morgan  and 
Jesus — The  kernel  ,of  this  and  the  preceding  chapter. 


It  is  almost  needless  to  say  that  in  describing  James  J.  Hill 
as  a  "splendid  brigand,"  I  use  the  words  to  mark  him  as  the  ideal 
embodiment  of  the  present  industrial  spirit,  and  not  as  derogatory 
to  his  personal  character.  He  is  beyond  compare  the  greatest 
man  yet  developed  by  railway  traffic  either  here  or  elsewhere. 
He  has  been  often  compared  to  Napoleon,  and  is  certainly  like 
the  Great  Emperor  in  his  attention  to  primary  basis  in  operating 
and  in  marvelous  attention  to  and  memory  of  details.  He  may 
have  lapses  of  memory  before  committees  and  commissioners — 
was  it  not  Napoleon  who  said  "every  sovereign  must  lie?"  As 
Napoleon  would  have  done  in  Hill's  place  and  with  his  schemes, 
he  had  explored  per  buckboard  or  otherwise,  and  planned  accord- 
ingly, the  location  of  much  of  his  "Manitoba"  system  long  be- 
fore it  was  built,  and  long  before  it  astonished  experts  in  gen- 
eral, and  probably  to  some  -extent  Hill  himself,  by  earning  a  little 
more  than  $7,000  gross  per  mile  on  its  1,300  miles  of  raw 
country  road  in  1882  and  1883.  Unlike  Napoleon's  or  Jay 
Gould's,  Hill's  natural  endowment  of  moral  character  is  of  the 


HERTIG    ON    TAXATION.  139 

very  best.  He  is  not  more  degenerate  than  any  man  tends  to  be- 
come, who  to  great  activity  joins  ideals  not  quite  the  highest. 
He  is  not  more  cynical  than  the  necessity  of  having  an  occasional 
cheap  patriot  on  his  secret  pay  roll  tends  to  make  a  man,  or  the 
necessity  to  carry  out  large  plans  by  overcoming  many  kinds  of 
opposition,  or  the  danger  of  losing  control  of  "Nipper"*  by  the 
greed  of  business  friends  in  seeking  a  nimble  profit  by  selling 
short ;  certainly  not  more  cynical  than  one  is  apt  to  become  by 
long  exposure  to  the  dead  set  which  human  cupidity  and  baseness 
make  at  a  man  in  Hill's  position. 

To  say,  as  I  have  said,  that  Hill's  natural  endowment  of 
moral  character  is  of  the  very  best — does  not  imply  statement  or 
belief  in  the  continuance  of  such  character.  Historian  and  ro- 
mancer— are  they  not  often  the  same? — alike  ten  us  that  Nero 
began  well,  and  that  in  the  first  year  of  Domitian's  reign,  it  was 
as  if  the  lamented  Titus  were  still  at  the  helm.  It  was 
young  Nero,  who  "would  listen  to  no  denunciation;  [who]  when 
a  decree  of  death  was  brought  to  him  to  sign,  regretted  that  he 
knew  how  to  write."  To  mention  in  the  same  connection  a 
virtuous  magnate  of  modern  democracy  and  the  wicked  emperors 
of  old  Rome,  suggests  a  comparison  from  which  I  do  not  shrink. 
Though  the  differences  are  more  marked  and  perhaps  more  prom- 
inent than  the  points  of  likeness,  these  latter  are  sufficiently  evi- 
dent and  persistent,  certainly  unmistakable.  Human  nature 
has  its  individual  differences;  and  the  medium  in  and  through 
which  each  individual  develops  would  give  a  somewhat  varying 
result,  were  that  medium  in  each  case  not  just  what  it  is  and  has 
been ;  as  the  belle-flower  apple,  for  instance,  varies  when  grown  in 
different  soils,  and  especially  in  different  climates.  The  rationale 
of  development  and  of  explanation  remains  still  the  same ;  only  in 
the  case  of  human  nature  as  seen  in  high  office  or  other  position  of 
rreat  power,  the  analyst  of  character  is  apt  to  fail  through  his 
own  limitations,  which  may  reflect  his  subject  in  the  mirror  of 
narrow  prejudice,  of  common  ready-made  ideals,  or  of  distorting, 
wonder-struck  bedazzlement.  I  do  not  by  any  means  intend  this 
three-fold  failure  of  the  mirror  which  the  analyst  strives  to  hold 
up  to  his  subject,  to  be  exhaustive  of  the  modes  of  such  failure. 
Nathaniel  Hawthorne,  for  instance,  would  not  have  failed  in  a 
presentation  of  the  development  of  Nero's  character — would  not 
have  failed,  that  is,  through  narrow  prejudice,  or  through  cheap 
Hawthorneish  ideals,  or  through  wonder-struck  bedazzlement; 


*  Northern  Pacific  Railway  (N.  P.  R.)  stock  became  familiarly  known 
in  the  exchanges  as  "Nipper"  long  before  it  proved  its  title  to  the  name  in 
the  panic  of  May  9,  1901.  • 


140  HERTIG    ON    TAXATION. 

but  he  would  have  failed  none  the  less,  as  is  sufficiently  apparent 
from  a  scrutiny  of  what  Hawthorne  could  and  did  do,  and  was 
sufficiently  apparent  to  Hawthorne  himself.  The  problem  of 
Nero  tempted  him,  but  he  had  too  much  self-knowledge  to  at- 
tempt its  solution.  Very  interesting,  however,  is  Hawthorne's 
apprehension  of  the  fact  of  such  problem.  "I  wish,"  he  says, 
"some  competent  person  would  undertake  to  analyze  and  develop 
his  [Nero's]  character,  and  how  and  by  what  necessity — with  all 
his  elegant  tastes,  his  love  of  the  beautiful,  his  artist  nature — he 
grew  to  be  such  a  monster.  Nero  has  never  yet  had  justice  done 
him,  nor  have  any  of  the  wicked  emperors ;  not  that  I  suppose 
them  to  have  been  any  less  monstrous  than  history  represents 
them ;  but  there  must  have  been  something  in  their  position  and 
circumstances  to  render  the  terrible  moral  diseise  which  seized 
upon  them  so  generally  almost  inevitable.  A  wise  and  profound 
man,  tender  and  reverent  of  the  human  soul,  and  capable  of  ap- 
preciating it  in  its  height  and  depth,  has  a  great  field  here  for  the 
exercise  of  his  powers.  *  *  *  The  subject  of  Nero  and  his 
brethren  has  often  perplexed  me  with  vain  desires  to  come  at  the 
truth." — French  and  Italian  Note-Books,  Vol.  II,  pp.  3-4.  To 
paint  a  Nero  from  within,  to  make  apparent  with,  artistic  nicety 
each  fitting  and  inevitable  step  in  his  downfall,  is,  I  concede, 
sufficiently  difficult,  perhaps  impossible.  But  that  is  not  my  af- 
fair, either  here  or  elsewhere.  It  is  enough  to  know  and  to  note 
the  few  main  facts  which  inevitably  accompany  and  condition 
development  of  character  as  well  in  ancient  Nero  as  in  modern 
plutocrat.  These  facts  are  much  the  same  whether  their  subject 
be  born  to  the  purple,  or  achieve,  by  his  own  efforts,  the  right  to 
wear  it.  On  him  who  is  to  the  purple  born,  and  on  him  who 
achieves  it,  the  like  facts  of  position  are,  however,  apt  to  produce 
different  effects.  The  former  takes  to  their  influence  an  imma- 
ture, perhaps  in  no  respect  a  formed  character ;  the  latter,  a  char- 
acter and  judgment  tried  and  seasoned  in  one  or  more  important 
respects,  but  having  many  a  blind  side.  In  the  general  imma- 
turity and  crudity  of  the  one  and  in  the  blind  or  ignorant  sides  of 
the  other,  lurk  the  like  dangers.  Imperial  position  does  not 
sweep  Marcus  Aurelius  from  his  moorings,  because  he  brings  to 
it  a  character  of  native  strength  that  has  already  attained  to  its 
full  growth.  He  may  be  expected  to  always  retain  the  funda- 
mental weakness  of  the  doctrinaire,  that  is,  ignorance  of  indi- 
vidual human  nature,  unhappily  conspicuous  in  his  allowing  his 
real  or  putative  son,  Commodus,  to  succeed  him :  the  meta- 
physical side  of  his  philosophy  may  not  be  quite  exact  to  his  own 
mind,  but  his  love  for  philosophy  is  genuine  and  he  bears  the  im- 
perial purple  "as  he  bore  everything  else,  in  that  self-abnegatory 


HERTIG     ON     TAXATION.  141 

spirit  which  the  higher  reaclfes  of  philosophy  bring."  Other 
rulers  may  see  further,  but  nothing  shall  take  from  Marcus  the 
title  of  "good  emperor." 

The  moral  doctrine  that  is  learned  by  heart  from  another's 
teachings,  or  is  espoused  because  it  is  "sound,"  may  or  may  not 
be  honored  with  the  lips  alone;  we  know  how  often  it  fails  in 
practice  to  control  conduct.  But  when,  as  in  the  case  of  Marcus 
Aurelius,  consistent  action  had  shown  the  internal  stamp  of 
genuine  moral  character,  the  world  was  not  surprised  to  find  that, 
as  loosely  paraphased  by  the  piquant  Saltus,  he  had  written  too : 

"Revenge  yourself  on  your  enemy  in  not  resembling  him. 
Forgive ;  forgive  always ;  die  forgiving.  Be  indulgent  to  the 
wrong-doer ;  be  compassionate  to  him ;  tell  him  how  he  should 
act ;  speak  to  him  without  anger,  without  sarcasm ;  speak  to  him 
affectionately.  Besides,  what  do  you  know  of  his  wrong  doing  r 
Are  all  his  thoughts  familiar  to  you  ?  May  there  not  be  some- 
thing that  justifies  him?  And  you,  are  you  entirely  free  from 
reproach?  Have  you  never  done  wrong?  And  if  not,  was  it 
fear  that  restrained  you  ?  Was  it  pride,  or  what  ?" 

If  Marcus  Aurelius  may  be  taken  as  of  the  best  type  among 
those  born  to  the  purple,  and  as  most  fitting  to  illustrate  how 
character  already  formed  turns  on  its  own  centre  despite  dazzling 
position, — Napoleon  may  be  taken  as  the  type  most  fitting  to  il- 
lustrate completely  formed  character  achieving  the  purple,  and  re- 
maining consistent  thereafter — affording  no  new  or  surprising 
development,  but  showing  merely  the  effect  of  practice  and  habit 
on  what  was  already  fully  formed.  Marcus  Aurelius  would  never 
have  picked  up  a  crown  with  the  point  of  his  sword ;  Napoleon 
would  have  doubtless  espied  some  crown  to  so  pick  up,  even  had 
that  of  France  not  lain  in  the  mire  awaiting  him.  Napoleon  car- 
ried with  him  to  his  very  first  command  a  profound  contempt  for 
human  nature  in  the  lump,  as  needing  and  ready  to  obey  a  firm 
master  who  would  govern  men  through  their  fears  and  passions. 
He  said  to  Miot  de  Melito  in  November,  1797,  when  his  star 
had  not  yet  lit  him  to  greater  glory  than  that  he  had  gained  as 
commander  of  the  army  in  Italy:  "The  [French]  nation  wants 
a  head,  a  head  illustrious  in  glory,  and  does  not  want  theory  of 
government,  fine  phrases,  ideologue  cant,  which  for  the  French 
is  meaningless."  If,  remarks  in  substance  Taine,  he  needed  any 
object  lesson  to  confirm  the  low  views  he  had  of  human  nature 
Egypt  soon  furnished  him  with  it, — Egypt  where  he  was  free 
from  all  control,  where  he  governed  like  a  sultan,  and  got  used 
to  acting  in  a  sultan's  way.  He  declared  himseli  specially  dis- 
gusted with  Rousseau's  idyllic  conception  of  uncivilized  man, 
after  he  had  seen  man  in  that  state  in  Egypt. — "The  savage  is  a 


142  HERTIG    ON     TAXATION. 

clog,"  was  Napoleon's  conclusion*  from  his  Oriental  experience^ 
and  he  looked  upon  civilized  man  as  having"  the  savage  lurking 
within  him  just  below  the  skin.  Savage  and  civilized  man  alike 
need  a  master,  a  magician  to  subdue  their  imagination,  to  disci- 
pline them,  to  muzzle  them  against  vicious  use  of  their  teeth, 
to  hold  them  in  leash,  to  look  after  them  and  lead  them  in  the 
chase :  Man's  lot  is  to  obey ;  he  deserves  no  better  and  has  no 
other  right. — TAINE,  Lc  Regime  Modcrnc,  1,72.  As  first  con- 
sul, later  as  emperor,  he  applied  on  a  large  scale  his  theory  that 
man  is  held  captive  or  subject  by  his  personal  passions — by  fear, 
cupidity,  sensuality,  self-love,  emulation ;  that  moreover  man's 
head  is  easily  turned;  he  is  imaginative,  credulous,  subject  to 
mad  rushes.  "Exalt  his  pride  and  his  vanity,"  continues  the 
theory ;  "get  him  up  an  extreme  and  false  opinion  of  himself  and 
others,  and  you  can  spur  him  on  to  go,  head  down,  wherever  you 
choose  to  have  him." — Id.  75.  "All  his  means  of  governing  men 
were  chosen  from  those  which  tend  to  degrade  man.  *  *  * 
He  pardoned  virtue,  only  when  he  had  succeeded  in  making  it 
ridiculous." — MME.  DE  REMUSAT,  I,  106,  II,  247,  336.  "He  be- 
lieved neither  in  virtue  nor  in  honesty ;  he  often  called  -these  two 
words  abstractions;  and  this  skepticism  was,  what  made  him  so 
distrustful  and  so  immoral.  *  *  *,  He  looked  upon  men  as 
base  money  or  as  instruments." — Count  CHAPTAL,  Notes  (unpub- 
lished.) This  conception  of  human  nature  and  of  the  motives 
that  lead  ic  remained  with  Napoleon  unchanged — if  anything 
strengthened  by  his  own  success,  though  failure  to  estimate  cor- 
rectly the  springs  of  human  conduct  was  finally  the  chief  factor 
in  his  downfall.  An  inevitable  and  disastrous  result  of  such 
conception  was  the  gradual  eliminatiion  from  those  about  him 
of  all  persons  possessing  in  marked  degree  either  intellectual 
or  moral  capacity.  "Toward  the  end,  he  tolerates  about  him  only 
vanquished  and  captive  souls ;  his  leading  henchmen  are  machines 
or  fanatics,  a  worshipping  adorer  like  Maret,  a  policeman  shrink- 
ing from  no  task  like  Savary.  From  the  beginning  he  has  re- 
duced his  ministers  to  the  rank  of  clerks ;  for  he  himself  is  ad- 
ministrator as  much  as  governor,  and  in  each  branch  of  service, 
he  looks  after  details  as  attentively  as  he  looks  after  the  whole ; 
hence  for  heads  of  departments,  he  wants  only  active  scribes, 
mute  carriers  out  of  orders,  docile  and  special  workmen,  no  free 
and  sincere  counselors." — TAINE,  Lc  Regime  Moderne,  I.  70-80. 
Chaptal,  in  his  Notes  (unpublished)  gives  a  graphic  picture  of 
the  rapidity  with  which  Napoleon's  temper  and  conception  made 
him  feel  at  ease  in  the  despot's  chair,  and  there  only.  During  the 
consulate,  "his  judgment,"  says  Chaptal,  "being  yet  unformed  on 
most  subjects,  he  permitted  discussion,  and  it  was  then  possible 


HERTIG     ON     TAXATION.  143 

to  inform  him,  and  often  to  get  adopted  an  opinion  put  forth  in 
his  presence.  From  the  moment  that  he  got  ideas,  true  or  false, 
on  the  various  matters  within  the  field  of  government,  he  con- 
sulted no  one  further;  **  *  *  he  had  keen  mockery  for  all 
those  who  put  forth  an  opinion  differing  from  his  own ;  he  sought 
to  make  them  ridiculous,  and  said  often,  tapping  his  head,  that 
that  good  instrument  was  more  useful  to  him  than  the  counsels 
of  men  who  were  reputed  to  have  instruction  and  experience. 
*  *  *  For  four  years,  he  sought  to  surround  himself  with  the 
strongest  men  of  each  party.  Afterwards  the  choice  of  his  agents 
began  to  seem  to  him  a  matter  of  indifference.  Believing'  him- 
self strong  enough  to  govern  and  administer  by  himself,  he  even 
took  pains  to  put  away  all  those  whose  talent  or  character  an- 
noyed him.  He  wanted  lackeys,  not  counselors.  *  *  *  The 
ministers  became  simply  upper  clerks  of  bureaux ;  the  council  of 
state  had  no  other  function 'than  to  give  formal  approval  to  his 
decrees ;  he  administered  down  to  the  pettiest  details.  All  about 
him  were  timid  and  passive  ;  they  heard  the  will  of  the  oracle, 
and  without  reflection,  carried  that  will  into  effect.  * 
Convinced  that  others'  knowledge  and  experience  could  no  longer 
be  useful  to  him,  he  thought  that  henceforth  he  needed  only  ready 
hands." 

A  distinguished  American,  who  had  the  best  of  opportunities 
for  arriving  at  an  enlightened  conclusion,  confirms  the  above 
French  testimony  at  every  point,  and  independently.  As  the  min- 
ister of  the  United  States  appointed  by  Thomas  Jefferson,  and 
charged  with  the  negotiations  which  resulted  in  the  purchase  of 
Louisiana,  Robert  R.  Livingston  was  at  Paris  before  Bonaparte 
formally  became  Napoleon,  while  yet  the  consular  ^overnmetit 
was  in  full  vigor,  and  while  the  one-man  policy  of  the  first  consul 
had  not  yet  taken  fixed  lines,  or  at  least  was  not  yet  apparent  in 
the  large  measure  which  it  was  about  to  fill  before  the  eyes  of  an 
amazed  world.  Livingston  wrote  in  September,  1801  : 

"There  never  was  a  government  where  less  could  be  done  by 
negotiation  than  here.  There  is  no  people,  no  legislature,  no 
counselors.  One  man  is  everything.  He  seldom  asks  advice 
and  never  hears  it  unasked.  His  ministers  are  mere  clerks,  and 
his  legislature  and  counselors  parade  officers." — Letter  to  Madi- 
son, as  quoted  by  Dr.  James  K.  Hosmer  in  History  of  the  Louis- 
iana Purchase,  (N.  Y.  1902),  119. 

Dr.  Hosmer's  work  gives  an  extremely  interesting  account  of 
how  Napoleon  arbitrarily  carried  out  his  personal  will  in  selling 
Louisiana  to  the  United  States.  I  cannot  refrain  from  quoting 
here  four  most  beautiful  lines  of  Victor  Hugo,  coupling 
1802,  the  year  of  his  own  birth,  with  an  advanced  stage  in  Bona- 


144  HERTIG     ON     TAXATION. 

parte's  becoming  Napoleon, — when  the  [iQth]  century  was  two 
years  old,  Rome  [the  about-to-be  empire  with  Paris  as  capital], 
was  replacing  Sparta"  [Paris  and  France  simply  and  sternly  rev- 
olutionary], when  "already  Napoleon  was  peering  from  the  Bona- 
parte shell,  and  brow  of  emperor  was  breaking  mask  of  first  con- 
sul too  fretted  with  law's  restraint :" 

Ce  siecle  avait  deux  ans,  Rome  remplacait  Sparte, 
Deja  Napoleon  percait  sous  Bonaparte, 
Et  du  Premier  Consul  trop  gene  par  le  droit 
Le  front  de  F  Empereur  brisait  le  masque  etroit.* 
It   was  but   a  consistent  manifestation  of  his   character,  as 
above   described,   that    Napoleon    felt   and    freely    expressed   his 
sovereign   contempt    for   all   the   social    conventions.     It   is    con- 
ceded that  he  had  little  time  and  less  enjoyment  for  intrigues 
with  women — a  fact  which  did  not  hinder  him  from  now  and 
again  entertaining  and  following  up  a  master's  caprice  in  that 
line.    After  such  an  affair  he  did  not  scruple  to  impart  to  Jose- 
phine the  "intimate  details"  of  his  chase  and  capture.     She  nat- 
urally protested,  but  in  just  what  words  I  believe  biography  fails 
to  tell;  doubtless  some  part  of  her  protest  in  spirit  at  least,  was 
equivalent  to   the   modern      woman's   "You're  no   gentleman." 
Mme.  de  Remusat,  however,  kindly  preserves   Napoleon's  an- 
swer to  Josephine's  reproaches:     "I  have  the  right  to  answer 
all  your  complaints  by  an  eternal  'Me!''     To  explain  which  the 
Emperor  added:     "I   am  apart  from  everybody;   I   accept  no- 


*I  regret  exceedingly  that  when,  or  just  about  when,  Mr.  Richard  Wat- 
son Gilder's  lyre  was  attuned  to  the  warbling  of  that  exquisite  lay,  begin- 
ning with 

"I  love  the  smell  of  her   garments," 

he  did  not  pass  from  his  fellow  feeling  with  Henry  of  Navarre  to  some 
sympathetic  glow  over  Napoleon,  and  give  to  the  world  a  translation 
of  the  lines  here  quoted  from  Hugo.  After  all,  from  the  great  Bour- 
bon to  the  great  Napoleon  is  but  a  step ;  and  when  I  think — if,  metaphys- 
ically speaking,  one  can  think  of  what  one  assumes  never  was — of  the 
translation  that  Mr.  Gilder  might  have  made,  and  I  have  given,  in  this 
behalf,  I  know  not  whether  it  were  better  to  mourn  absolutely,  or  just 
relatively  to  patient  search  in  the  files  of  the  Century  Magazine,  if  per- 
chance there  be  not  there  Gilder's  or  Gilderian's  gem  in  such  kind : 
The  century  two  years  old, — no  Century  yet, — 

The  Prankish  Rome  her  Sparta's  place  was  taking; 
Napoleon  out  of  Bonaparte's  worn  shell  'gan  get, 

And  Caesar's  front  First  Consul's  mask  was  breaking! 
To  find  in  a  Century  line  an  elision  and  an  ellipsis  converging  into  the 
untamed  alliterative  vigor  of  "gan  get,"  is  like  the  story  of  Henry  Martin 
making  merry  over  walnuts  and  wine  almost  "too  wildly  dear"    for  ex- 
pectation.    Perhaps  a  more  reasonable  probability  for  the  third  line  would 

Napoleon  now  in   Bonaparte's  shell  did  fret! 


HERTIG    ON    TAXATION.  145 

body's  conditions."  And  Taine  further  interprets  and  expounds 
tne  Napoleonic  thought:  "I  accept  obligations  of  no  kind,  of  no 
code,  not  even  of  that  common  code  of  exterior  civility  which 
diminishing  or  masking  primitive  brutality,  permits  men  to  meet 
without  shocking  each  other." — Le  Regime  Moderne,  I.  93. 
.Joubtless  Napoleon  did  not  perceive  the  immense  advantage 
from  a  democratic  standpoint,  the  necessity,  in  fact,  if  life  and  so- 
ciety are  to  reach  a  tolerable  plane — that  the  conceptions  underly- 
ing such  words  as  "lady"  and  "gentleman"  should  permeate  all  so- 
cial strata,  and  hold  out  for  pursuit  social  ideals  which  shall 
not  be  beyond  the  humblest  position  and  the  most  moderate 
capacity.  It  is  only  the  idea  of  such  advantage  and  such  neces- 
sity, or  v  f  kindred  advantage  and  kindred  necessity,  that  can 
humanize  the  infusion  of  truth,  truth  none  the  less  though  cyn- 
ical and  unpalatable,  that  mingles  with  the  following  words  of 
Napoleon,  reported  by  Mme.  de  Remusat,  I.  277:  "I  have  small 
liking  for  the  vague  and  leveling  word  'conventions,'  which  the 
herd  of  you  throw  out  on  every  occasion;  it  is  an  invention  of 
the  fools  to  get  closer  to  the  people  of  good  sense,  a  sort  of  so- 
cial gag  against  the  strong,  helping  mediocrity  to  play  its  own 
game.  *  *  *  Ah!  good  taste!  Another  of  those  classic 
phrases  that  I  don't  admit." 

None  more  strikingly  than  Napoleon  possessed  the  strong 
hand;  a  better  conception  of  human  nature  would  have  enabled 
him  to  found  a  really  strong  government.  Seeing  behind  human 
nature  no  motive  worthy  of  great  respect,  and  seeing  in  the  crea- 
tures which  body  that  nature  forth  only  the  raw  material  of  abso- 
lute government,  "the  heap  of  clay  awaiting  the  potter's  hand  to 
give  it  form,"  and  abiding  by  this  conception  as  final  despite  its 
contradiction  by  palpable  facts — the  stubborn  opposition  of  Eng- 
land, the  mild  but  unbending  resolution  of  the  Pope,  the  violent 
insurrection  of  Spain,  the  fermenting  discontent  of  Germany,  the 
resistance  of  Catholic  conscience,  the  gradual  defection  of 
France, — he  must  needs  so  abide  because  such  conception  was 
innate  in  his  own  character,  because  he  must  see  in  man  just 
what  his  ambitious  needs  bade  him  see ;  and  from  this  blind  side 
of  his  character,  aided  by  the  exuberance  of  his  constructive 
imagination,  came  most  of  the  false  calculations  that  led  him 
to  ruin  and  St.  Helena. — TAINE,  ID.  I.  75,  76.  They  who  are  fond 
of  tracing  Napoleon's  downfall  to  a  colic  or  other  indisposition  at 
Borodino,  forget  that  there  is  always  an  abundance  of  little 
things  to  furnish  forth  the  proximate  cause  or  causes  for  a  top- 
pling structure  to  tumble  down;  whereas  the  true  cause  of  its 
fall  lies  in  its  being  essentially  and  fundamentally  a  toppler. 

Napoleon,  however,  vigorously  as  his  own  personal  will  re- 


146  HERTIG     ON     TAXATION. 

pudiated  modern  ideals  and  limitations,  could  not  escape  be- 
ing the  child  of  his  time — in  which  even  another  Augustus  was 
impossible,  to  say  nothing  of  Caligula,  Nero,  Domitian,  or  Heli- 
ogabalus.  Thus  Augustus,  whose  character  has  been  so  well 
varnished  by  some  historians  had  a  Rome  that  perfectly  tolerat- 
ed him  as  an  unscrupulous  debauchee  as  well  in  youth  as  in  ripe 
age.* 

vvlien  he  sent  the  imperial  conveyance,  or  "litter,"  as  it  is 
generally  called,  to  a  Roman  matron,  however  high  her  rank,  it 
was  always  an  effective  invitation  "to  come  to  the  Palatine,  and 
to  yield  herself  like  the  lowest  slave." — M.  BEULE,  Augustus, 
159.  The  husband  had  too  lively  a  recollection  of  the  bloody 
Triumvir  Octavianus  to  dispute  the  possession  of  his  wife  with 
the  imperial  Augustus,  who  had  developed  from  that  triumvir. 
The  sending  of  the  imperial  litter  was  no  infrequent  occurrence; 
it  happened,  indeed,  so  often  that  Augustus  put  forth  reasons  of 
state  to  justify  himself — the  need  to  thus  find  out  the  secrets  of 
eminent  families,  to  find  out,  in  the  interest  of  Roman  order, 
what  was  going  on  amongst  his  enemies.  Napoleon  was  too 
much  the  child  of  his  time  to  take  this  Augustan  way  of  finding 
a  new  mistress,  when  an  occasional  whim  impelled  him  to  such 
aim.  His  Paris  was  perhaps  little  less  immoral  at  heart  than  the 
Rome  of  Augustus;  but  in  vice,  as  in  despotism,  there  are  fash- 
ions as  dangerous-  in  a  large  way  to  disregard  as  the  fashions 
in  clothes  and  every-day  conventions  in  a  small  way.  Disregard 
in  the  one  case  may  bring  about  assassination  or  revolution  witii 
the  same  readiness  as  disregard  in  the  other  may  bring  about 
social  ostracism.  Besides,  Napoleon  did  not  need  Machiavelli 
to  prompt  him  that  it  is  dangerous  for  a  prince  to  take  the  wives 
of  his  subjects;  it  was  of  fundamental  doctrine  with  Napoleon, 
and  from  his  standpoint  of  the  most  discreet  statesmanship,  that, 
to  exploit  the  individual  advantageously  for  the  state,  the  Na- 
poleonic despotic  state,  he  the  individual,  must  have  and  feel 
himself  in  secure  possession  of,  his  private  domain,  his  personal 
fenced  corner,  which  the  government  shall  severely  let  alone. 
Otherwise  his  condition  will  seem  to  him  intolerable;  he  will 
have  no  heart  to  toil  and  moil  for  the  master.  Beware  of  breaking 
or  drawing  the  temper  from,  this  powerful  and  precious  spring 
of  action ; — let  him  go  ahead  in  working,  producing,  laying  up 


*  If  Gibbon  has  been  thought  to  praise  too  highly  the  government  of 
Augustus,  that  eminent  historian  must  be  acquitted  of  anywise  flattering 
the  private  character  of  Augustus,  of  whom  he  says:  "A  cool  head,  an 
unfeeling  heart  and  a  cowardly  disposition,  prompted  him  at  the  age  of 
nineteen  to  assume  the  mask  of  hypocrisy  which  he  never  afterwards  laid 
aside."  Decline  and  Fall  of  the  Roman  Empire,  Chapt  III 


HERTIG    ON     TAXATION.  147 

savings,  though  it  be  only  to  have  him  get  wherewith  to  satisfy 
the  tax-gatherer;  let  him  go  ahead,  get  married,  rear  a  family, 
though  it  be  only  to  furnish  sons  for  drafting  into  the  army." — - 
TAINE,  I,  171. 

There  were,  besides  the  limitations  of  his  time  which  Napo- 
leon instinctively  recognized  and  heeded,  thereby  attaining  his  daz- 
zling success,  other  limitations  on  which  he  trampled  defiantly  or 
heedlessly,  and  which  in  the  end  caused  his  overthrow;  but  at 
heart  he  despised  all  limitation,  as  well  that  by  which  he  profit- 
ed as  that  which  his  cannon  could  not  sweep  away.  An  excel- 
lent judge  of  human  nature  except  in  its  higher  reaches,  an  ad- 
ministrator without  a  peer,  intolerant  of  peculation  except 
where  he  winked  at  it  to  bind  the  thief  more  strongly  to  his  serv- 
ice, Napoleon  brought  to  empire  with  him  his  masterful  mind 
and  marvelous  faculties,  practically  uninstructed  and  unhamper- 
ed by  governmental  practice  or  governmental  tradition.  His 
unique  native  ability  sufficed  for  the  deeds  of  brilliant  oppor- 
tunism with  which  he  amazed  and  terrified  the  world.  A  Na- 
poleon, called  to  govern  in  any  age  or  time,  could  not  escape  that 
turning  of  the  head  which  came  to  the  emperor  from  the  colossal 
plans  which  his  stupendous  constructive  imagination  kept  ever 
building  up,  and  which,  like  dreams  of  Alexander  stirring 
Caesar,  would  never  let  him  rest.  But  between  that  imagination 
ever  firing  its  owner  to  wider  conquest,  to  reach  India  through 
subdued  Russia,  and  the  mad  imagination  of  Caligula,  the  mob- 
crazed  and  art-dizzy  imagination  of  Nero,  Domitian  striving  to 
outdo  Nero,  that  of  'Commodus  outdoing  both,  the  imagination  of 
Heliogabalus  making  "depravity  a  pursuit,"  and  so  successfully 
that  he  carried  depravity  "not  only  beyond  the  limits  of  the  im- 
aginable, but  beyond  the  limits  of  the  real," — between,  I  repeat, 
the  imagination  of  Napoleon  and  that  of  any  of  the  wicked  em- 
perors of  old  Rome,  the  difference,  vast  as  it  is,  is  not  a  differ- 
ence in  degree  but  a  difference  in  kind — the  difference  between 
the  dreams  of  the  strong  head  turned  by  its  very  strength  and 
the  dreams  of  the  weak  head  carried  by  circumstance  to  the  diz- 
ziest of  heights,  and  held  there  in  seeming  security  by  strength 
not  its  own.  "There  is,"  says  Edgar  Saltus,  "no  term  in  English  to 
convey  that  dominion  over  sea  and  sky  which  a  Caesar  pos- 
sessed, and  which  Caligula  was  the  earliest  to  understand.  Au- 
gustus was  the  first  magistrate  of  Rome,  Tiberius  the  first  citizen, 
Caligula  was  the  first  emperor,  but  an  emperor  hallucinated  by 
the  enigma  of  his  own  grandeur,  a  prince  for  whose  sovereignty 
the  world  was  too  small. "-^-Imperial  Purple,  69.* 


Saltus.  here  quoted,  is  always  piquant,  though  his  piquancy  is  not 


148  HERTIG    ON    TAXATION. 

There  is  in  fact  neither  boundless  nor  irresponsible  power ; 
but  the  book-keeping  of  God  and  of  the  people  Oiften  permits  it 
to  seem  so,  as  it  did  to  the  wicked  emperors,  turning  their  heads, 
and  causing  such  thoughts  as  that  expressed  by  Caligula  to  his 
mistress  Pryallis :  "And  to  think  that  I  have  but  a  sign  to  make 
and  that  beautiful  head  of  yours  is  off." — Id.  75.  As  kings  and 
other  hereditary,  or  capriciously  chosen  rulers,  have  been  per- 
haps oftener  than  otherwise  below  the  average  man  in  mental 
and  moral  strength,  it  is  not  surprising  that  such  generalizations 
as  the  following  by  Count  d'Herisson  have  been  often  made, 
and  never  without  some  verifying  instance  in  mind.  "Surely 
power  obliterates  moral  sense,  and  the  most  liberal  resolutions 
of  a  new  monarch  fade  away  as  he  mounts  the  steps  of  the 
throne." — Autour  d'Une  Revolution,  315. 

The  problem  of  the  Neroes  which  attracted  and  perplexed 
Hawthorne,  which  in  Napoleon's  case  (most  important  for  the 
indirect  light  it  sheds  on  the  Neroes)  does  not  exist  and  which 
to  the  sober  thinker  presents  little  of  the  difficulty  with  which  it 
tries  the  skillful  and  conscientious  artist — reduces,  then,  in  its 
simplest  terms,  to  weak  and  unformed  character,  or.  in  some 
cases,  to  character  formed  and  seasoned  in  depravity,  developing 
into  manifestations  which  startle  and  appall  in  the  possession 
and  exercise  of  practically  boundless  and  irresponsible  power, 
though  the  fear  which  is  never  inseparable  from  great  cruelty, 
and  even  a  straining  after  popularity  of  a  certain  kind  are  impor- 
tant factors  in  the  problem.  Modern  despots,  bar  Napoleon  and 
some  of  the  Orientals,  are  tame  and  petty  creatures  beside  the 
imperial  Caesars.  The  hulking  and  incompetent  Alexander  III. 
had  those  same  domestic  virtues  which  made  Jay  Gould's  pas- 
tor forget  the  colossal  thefts  of  the  little  demon  of  Wall  street, 
and  which  made  some  foreign  critics  disposed  to  condone  the 
administrative  brutalities  of  the  late  Czar.  It  was  a  thorn  in 
Napoleon's  side  that  he  could  not  muzzle  the  English  press ;  and 
even  in  censored  and  otherwise  muzzled  Russia  the  official 
barbarians  responsible  for  her  "most  cruel"  most  despotic,  and 
most  retrogade"  government,  as  Tolstoi  terms  it,  are  painfully 
aware  that  a  great  outside  public  condemns  their  atrocities,  and 
have  raised  the  making  of  lying  apologies  to  a*  fine  art,  to  befog 
and  appease  that  public.  The  restraints  which  public  opinion 
and  the  ideals  of  common  decency,  to  say  nothing  of  constitu- 


always  coupled  with  what  theologians  call  "inerrancy."  Soberer  authority, 
however,  confirms  substantially  what  he  says  of  Caligula.  "In  the  reigns 
of  Caligula,  Cladius  and  Nero  the  politic  disguise  under  which  Augustus 
and  Tiberius  had  endeavored  to  conceal  the  extent  of  their  power  was 
n  contemptuously  aside." — H.  F.  PELHAM,  in  Encyclopedia  Britannica. 


HERTIG    ON    TAXATION.  149 

tional  limitations,  impose  upon  modern  princes,  had  practically 
no  existence  in  ancient  Rome.  Where  the  stoic  philosophy,  as 
in  the  case  of  the  Antonines,  or  other  influences  had  confirmed 
the  native  strength  of  an  emperor's  character,  he  governed  well, 
and  was  in  the  main  free  from  anything  thought  to  be  personal 
vice  in  that  day;  shining  examples  of  domestic  and  civic  virtues 
have  never  been  quite  absent  in  the  worst  of  times ;  but  in  the 
Rome  of  the  Caesars,  whoever  had  either  open  or  latent  ten- 
dency to  what  we  now  call  degeneration,  found  little  external 
prop  or  support  against  headlong  fall.  "There  have  certainly 
been  many  periods  in  history  when  virtue  was  more  rare  than 
under  the  Caesars;  but  there  has  probably  never  been  a  period 
when  vice  was  more  extravagant  or  uncontrolled.  Young  em- 
perors especially,  who  were  surrounded  by  swarms  of  sycophants 
and  panders,  and  who  often  lived  in  continual  dread  of  assassina- 
tion, plunged  with  the  most  reckless  and  feverish  excitement 
into  every  variety  of  abnormal  lust.  The  reticence  which  has 
always  more  or  less  characterized  modern  society  was  unknown, 
and  the  unblushing,  undisguised  obscenity  of  the  epigrams  of 
Martial,  of  the  Romances  of  Apulius  and  Petronius,  and  of  some 
of  the  dialogues  of  Lucian,  reflected  but  too  faithfully  the  spirit 
of  their  time." — LECKY,  History  of  European  Morals,  II.,  321. 

It  is  peculiarly  appropriate  to  this  work  and  pertinent  as 
showing  a  flaw  already  apparent  in  the  character  of  young  Nero, 
that  early  in  his  reign  he  was  an  over-radical  tax  reformer!  Who 
knows  but  some  enthusiastic  "single-taxer"  of  our  day  might 
develop  into  a  Nero,  had  he  but  Nero's  chance?  Nero  would 
have  gone  a  step  further  than  the  single-taxer — would  have 
abolished  and  not  merely  shifted  the  burden.  But  I  will  let  Gib- 
bon speak  for  him  :  "In  the  first  and  golden  years  of  the  reisrn  of 
Nero,  that  prince,  from  a  desire  of  popularity,  and  perhaps  from 
a  blind  impulse  of  benevolence,  conceived  a  wish  of  abolishing 
the  oppression  of  the  customs  and  excise.  The  wisest  senators 
applauded  his  magnanimity ;  but  they  diverted  him  from  the  exe- 
cution of  a  design  which  would  have  dissolved  the  strength  and 
resources  of  the  republic.  Had  it  indeed  been  possible  to  realize 
this  dream  of  fancy,  such  princes  as  Trajan  and  the  Antonines 
would  surely  have  embraced  with  ardor  the  glorious  opportunity 
of  conferring  so  signal  an  obligation  on  mankind.  Satisfied,  how- 
ever, with  alleviating  the  public  burden,  they  attempted  not  to 
remove  it."— Decline  and  Fall,  ch.  VI. 

Now  the  modern  plutocrat,  whether  named  Hill  or  other- 
wise— I  limit  myself  to  the  kind  living  and  operating  on  Amer- 
ican soil — frankly  accepts  the  limiting  conditions  of  his  time  and 
country,  at  least  in  the  outset  of  his  career.  He  is,  in  the  begin- 


150  HERTIG    ON    TAXATION. 

ning,  seldom  without  some  of  the  amiability  that  characterized 
young  Nero,  and  which,  for  the  rest,  most  young  Americans  pos- 
sess— a  fact  which  does  not  necessarily  imply  that  they  a«£ 
potentially  Neroes.  He  cuts  rather  a  sorry  figure  in  American 
light  literature,  if  either  sweet  or  light  be  applicable  to  the  novels 
that  dribble  along  in  American  magazines.  In  novels  that  fall 
below  the  standard  of  magazine  literature,  he  sometimes  buys  a 
conscience  or  a  concubine,  and  gets  the  worst  of  the  bargain. 
When  only  "tolerably  virtuous,"  to  borrow  a  phrase  which  the 
late  Robert  Ingersoll  launched  with  gleeful  contempt,  he  has 
been  known  to  reflect  that,  while  an  atmosphere  thick  with 
conventions  is  an  excellent  thing,  and  does  not  fetter  materially 
operations  financial  or  otherwise,  it  greatly  aids  the  black-mailer 
to  levy  and  collect  an  exorbitant  tax.  When  intolerably  virtu- 
ous, only  modestly  plutocratic,  and  with  no  high  ideals  to  fill  the 
place  taken  in  others  by  the  pleasures  of  sin, — the  case,  though 
rare,  does  happen, — he  has  been  known  to  "retire  early,  get 
melancholy,  and  die  before  his  time.  He  has  been  known  to 
read  in  sympathetic  youth  John  Stuart  Mill  on  the  Subjection 
of  Women,  and  to  wince  in  ripe  age  at  getting  his  leg  heavily 
pulled  for  alimony.  Though  in  rare  cases,  one  may  need  most 
of  the  finders  in  reckoning  his  consecutive  polygamies  per 
successive  mistresses,  his  voice  will  never  fail  to  lend  resonant 
support  to  those  who  demand  a  more  stringent  regulation  of 
divorce.  Though,  like  Panurfre,  he  is,  in  general,  for  his  inti- 
mates the  best  fellow  in  the  world,  he  gets  scant  justice,  unless 
he  pays  high  for  it,  and  not  always  then.  Though  circumstances 
force  him  to  be  art  anarchist,  and  to  nullify  in  detail  such  laws  as 
run  counter  to  his  will  and  his  interest,  as  Jay  Gould  did  the 
national  banking  law,  when  about  Black  Friday  time,  he  had  the 
Tenth  National  Bank  of  New  York  certify  checks  without  limit 
and  several  kinds  of  law  when  he  deliberately  printed  and  sold  ail 
the  "Erie"  certificates  of  stock  that  Vanderbilt  would  buy, — yet 
the  professional  anarchist  refuses  to  hail  him  as  comrade,  and 
v  ould  rather  give  him  the  warm  bomb  than  the  glad  hand. 
Statesmen  of  Senator  M.  S.  Quay's  purity  impeach  his  piety  and 
his  principle,  fry  him  for  campaign  contributions,  and  even  re- 
proach him  for  not  being  a  cheerful  giver:  'There  must  be  less 
business  and  more  principle  in  our  politics,  else  the  Republican 
party  and  the  country  will  go  to  wreck.  The  business  issues  are 
making  our  politics  sordid  and  corrupt.  The  tremenduous  sums 
of  money  furnished  by  business  men,  reluctantly  in  most  in 
s'a^ces.  are  polluting  the  well-springs  of  our  national  being."- 
QUAY  in  1896,  ap.  Lit.  Digest,  XIV.,  227.  Statesmen  of  Ex- 
President  Harrison's  capacity  reckon  that  his  tax-dodging,  if  not 


HERTIG    ON    TAXATION.  151 

stopped,  will  disrupt  the  nation.  Sad  and  strenuous-looking  edit- 
ors, like  Mr.  Bliss  Perry  of  the  Atlantic  Monthly,  who  would 
rather  die  than  print  anything  that  would  impair  the  vested  right 
of  Houghton,  Mifflin  &  Co.,  to  the  prospective  profits  in  books 
published  by  that  respectable  firm, — lash  him  to  the  main  brace, 
and  flay  him  alive  for  franchise-stealing.  The  President  of  the 
University  of  Minnesota  has  warned  our  young  men  that  if  they 
do  not  stop  their  ears  against  the  siren  gambling  spirit  of  the 
plutocrats,  the  country  will  go  to  the  dogs  or  like  disastrous 
goal  within  twenty-five  years,  of  which,  if  I  mistake  not,  some 
six  or  seven  are  already  run.  Arthur  Hadley,  President  of  Yale 
University,  seems  to  have  wrestled  down,  like  a  magazine  hero, 
his  former  wicked  impulse  to  visit  the  plutocrat  with  social  os- 
tracism, and  to  have  found  philosophic  rest  in  the  conclusion 
chat  "there  will,  of  course,  always  be  a  conflict  between  those 
who  have  more  money  than  votes,  *  *  *  an<3  those  who 
have. more  votes  than  money," — a  proposition  which,  perhaps, 
goes  a  step  beyond  that  other  one  of  Mr.  Hadley,  The  chief  use 
of  education  is  to  broaden  the  mind,  and  may  possibly  be  held  to 
show  that  in  Mr.  Hadley's  case,  at  least,  the  chief  use  of  educa- 
tion is  to  flatten  the  mind.  But  in  another  Yale  professor,  an 
economist  like  and  unlike  Mr.  Hadley,  the  poor,  despised  pluto- 
crat has  a  friend  who  pipes  no  uncertain  note — Prof.  W.  G.  Sum- 
ner.  He,  by  the  way,  having  cast  eyes,  the  very  opposite  of 
sheeps',  at  American  homes,  and  finding  unhappy  ninety  per 
cent,  of  the  marriages  there  in  evidence,  must  needs  be  hard 
pushed,  to  find  somewhere  some  salt  of  the  earth.  What  skeptic 
so  heartless  as  to  rob  poor  Sumner  of  faith  in  the  Captain  of  In- 
dustry and  the  plutocrat  employer? 

In  these  days  of  liberalized  Christianity,  they  who  might  in 
other  days  have  been  religious  fanatics,  have  found,  like  Sum- 
ner, a  make-shift  substitute  in  orthodox  political  economy.  I 
use  "orthodox"  in  this  connection  only  for  courtesy;  there  is 
now  no  othordox  political  economy ;  and  of  all  the  pseud-sciences 
not  even  speculative  metaphysics  has  made  worse  bankruptcy 
than  political  economy.  There  is  more  harmony  between  the 
different  wings  of  theoretical  anarchism  than  between  almost 
any  individual  economist  and  his  next  neighbor  in  the  same  pro- 
fessional line.  The  economist  can't  go  a  step  without  mounting 
on  the  stilts  of  technical  ''value"  and  technical  "capital;"  and 
generally  does  not  try  to  go  a  step  without  devoting  a  dull  and 
lengthy  chapter  to  telling  his  reader  how  badly  other  economists 
have  limped  in  non-advancing  zio-zags  because  they  did  not 
know  either  what  "value"  means  or  what  "capital"  means;  and 
his  reader  may  lay  good  odds  that  the  next  professor  to  write  a 


152  HERTIG     ON     TAXATION. 

book  will  not  fail  to  add  another  name  to  the  list  of  limping 
stilt-users.  There  is  not  a  settled  county  in  all  Minnesota,  or  for 
that  matter  in  the  United  States  that  has  not  once  or  repeatedly 
given  ocular  refutation  to  Ricardo's  theory  of  rent.  But  I  said 
"orthodox"  economy,  and  there  is  a  yellow  thread  of  unity,  or 
tie  that  binds,  and  which  may  be  used  to  sustain  the  description, 
"orthodox."  That  yellow  thread  is  worshipping  awe  before  the 
golden  calf,  which  orthodox  economists  write  Wealth,  and,  as 
orthodox,  love  best  when  its  material  is  mined,  and  fashioned 
into  shape,  along  old-time  lines.  In  their  camp,  then,  the  often 
elsewhere  and  otherwise  despised  plutocrat  finds  words  of 
cheer  and  encouragement,  a  claim  of  moral  and  scientific  sanc- 
tion for  that  practical  philosophy  of  life  embodied  in  the  words 
of  a  frank  millionaire  to  me  in  1895,  just  after  the  federal  su- 
preme court  had  finally  held  the  income  tax  law  to  be  uncon- 
stitutional,— "The  rich  man  generally  comes  out  on  top."  Thus 
indorsed,  basking  in  the  obsequious  smiles  of  the  family  pur- 
veyor, the  family  physician,  the  family  pastor,  sometimes  even 
of  the  family  archbishop,  he  need  never  lack  the  caressing  flat- 
tery of  other  intimates,  nor,  in  general,  flattery  on  the  part  of 
the  "capitalist"  press.  Unless,  like  Astor,  he  is  sicklied  o'er 
with  the  wealth  of  his  ancestors,  he  has  no  aching  void  that  only 
"good  society"  can  fill.  He  has  been  known  to  brand  as  an  "ig- 
noble aspiration"  the  desire  to  be  rich,  which  saying  did  not 
diminish  either  his  desire  or  his  skill  as  a  tax-dodger;  nor  does 
such  contradiction  necessarily  show  him  a  bad  man  or  a  hypo- 
crite. In  his  beginnings,  at  least,  he  is  generally  as  good  as, 
and  often  better  than,  his  neighbors.  When  he  is  self-made, 
there  was  a  time  in  his  life  when  for  twenty-five  thousand  dol- 
lars or  so  he  would  have  sworn  allegiance  to  the  spirit  of  the  law 
and  of  all  the  prophets,  and  perhaps,  for  such  sum,  have  kept  it. 
So  far  from  making  "depravity  a  pursuit"  he  has  so  fully  and 
freely  accepted  modern  civil  conditions  that,  in  general,  his  chief 
individual  crime  is  that  he  stole  a  part  of  his  fortune  under  the 
forms  of  law.  The  more  atrocious  crime  of  his  class,  the  fas- 
tening of  industrial  slavery  upon  the  masses  and  his  stubborn  re- 
sistance to  effort  that  would  abolish  such  slavery — is  indeed 
atrocious  in  result,  but  due  to  conditions  so  complex  as  to  dull 
somewhat  the  edge  of  individual  responsibility.  The  class  de- 
fiance, "What  are  you  going  to  do  about  it?"  is  not  unmixed 
with  many  a  sincere  individual  utterance  from  the  class  of  ."What 
can  you  do  about  it?"  Where  there  is  a  skepticism  that  would 
be  converted,  if  it  could  be  shown  how,  the  friends  of  the  faith 
must  seriously  consider,  if  the  fault  of  failure  to  convert  lie  not 
in  the  doctrine  or  in  its  missionaries.  The  economists  are  fond 


HERTIG    ON     TAXATION.  153 

of  saying,  though  not  quite  so  clearly  as  I  say  it  for  them,  that 
the  cost  of  the  product  of  the  poorest  mine  that  is  kept  worked 
measures  the  price  that  all  miners  of  like  products  get  for  the 
same, — the  profits  of  the  paying  mines  being,  as  it  were,  a  sur- 
plus product  much  like  Ricardo's  economic  rent;  that  the  cost  of 
raising  wheat  on  the  poorest  lands  that  are  handy  to  market  and 
on  which  people  keep  raising  wheat,  or  of  raising  on,  and  mar- 
keting from,  the  better  but  less  favorably  situated  lands  which 
just  continue  to  attract  continuous,  or  nearly  continuous  wheat- 
raising — measures  with  substantial  accuracy  the  price  of  that 
grain,  for  that  the  tillers  of  such  lands  cling  to  or  let  go  of  wheat- 
raising  just  about  when  price  is  a  shade  above,  or  a  shade  below 
that  cost.  This  theory  and  the  propositions  which  it  implies 
practically  ignore  the  resisting  medium  which  air  abstract  social 
theory  must  face  when  it  is  launched  from  the  professorial  desk 
for  a  trial  in  real  life;  ignore  the  role  of  hope  and  ignorance  in 
human  affairs;  ignore  that  capital,  working  mines,  often  keeps 
a  ledger  showing  for  years  at  a  stretch  a  huge  balance  on  the 
wrong  side,  that  stubbornness  often  keeps  no  books,  and  as 
often  as  not  capitalizes  its  labor  into  what  is  truly  and  literally 
a  sinking-fund,  and  thereby  is  never  without  the  hope  of  a 
bumper  harvest  "like  that  in  King  Charles'  time,"  and  the  hope 
of  a  bumper  price  like  that  in  some  other  time.  With  the  con- 
viction that  "the  seasons  have  changed  so  as  wheat  don't  do  well 
here  any  more,"  the  American  farmer  quits  growing  it  in  his 
particular  locality.  Light  yield,  or  none  at  all,  palpably  disas- 
trous, moves  him  to  quit,  consideration  of  price  hardly  at  all. 
My  friends,  then,  the  economists,  will  hardly -blame  me  after 
such  example  of  their  worst  or  least  desirable,  as  gauging  the 
standard  of  price,  for  carrying  that  "worst  or  least  desirable"  into 
a  different  field,  there  to  do  better  work;  the  worst  or  least  de- 
sirable conduct  of  the  individual  plutocrat  may  set  the  pace  for 
plutocrat  conduct  in  general,  and  certainly  does  furnish  the 
standard  by  which  the  public  judges  plutocratic  motive  and  in- 
tent, does  furnish  brilliant  proof  in  support  of  Hamlet's  happy 
saying,  "There  is  nothing  either  good  or  bad  but  thinking  makes 
it  so."  Such  crimes  as  abuse  of  legal  process,  deliberate  slander- 
ing of  a  city's  credit,  wholesale  attempt  to  debauch  public  opin- 
ion, persistent  libeling  of  the  motives  and  character  of  every 
prominent  opponent,  deliberate  breach  of  contract,  praying  hy- 
pocrisy using  Sunday  as  the  safest  day  for- nefarious  operations, 
malicious  mischief  little  different  in  kind  from,  and  with  worse 
motives  than,  anarchistic  bomb-throwing — all  these  and  the  de- 
tails of  their  working  are  set  forth  in  Henry  D.  Lloyd's  Wealth 
against  Coimnomcealth,  chapters  XXII.,  XXIII.,  and  XXIV. 


154  HERTIG    ON    TAXATION. 

(New  York,  1894).  The  people  of  Toledo,  Ohio,  a  city  having 
in  1888  about  90,000  inhabitants  undertook  then  to  free  them- 
selves from  the  monopoly  of  two  pipe  line  companies  then  and 
there  having  and  using  separate  franchises  to  supply  the  people 
with  natural  gas.  "They  obtained  their  franchises  as  competi- 
tors, but  were  soon  found  to  be  one  in  ownership,  prices,  and  all 
details  of  management." — Id.  305.  These  companies  "in  the 
midst  of  the  work  of  laying  pipes"  had  suspended  operations 
until  the  city  council  at  their  dictation  had  fixed  the  prices  the 
people  should  pay  for  gas.  "These  rates  were  enough  to  pay 
not  only  a  fair  dividend,  but  to  return  in  a  few  years  every  dollar 
of  capital  invested  in  lands,  pipes,  etc."  Later  they  demanded 
another  increase  which,  according  to  the  sworn  statement  by 
their  superintendent  of  the  amount  of  gas  supplied  daily  would 
have  amounted  to  $351,362.50  a  year.  Toledo's  own  first  esti- 
mate of  the  amount  necessary  to  buy  gas  land  and  to  build  pipe 
lines  did  not  exceed  $750,000 — an  amount  somewhat  exceeded 
when  the  city  came  to  the  work  of  carrying  out  its  plans,  though 
the  excess  of  cost  over  estimate  was  largely  caused  by  the  ham- 
pering efforts  of  the  two  private  companies.  "They  made  the 
charges  [presumably  those  contemplated  in  the  farther  'in- 
crease' for  which  they  asked,  but  did  not  obtain,  authority] 
regardless  of  the  ordinance,  and  used  delay  in  furnishing  gas 
as  a  means  to  make  people  willing  to  pay  these  illegal  rates. 
Consumers  seeking  to  renew  their  contracts  were  informed  that 
the  price  would  be  doubled."  Toledo  had  further  grievances. 
"The  companies  refused  to  supply  fuel  to  an  oil  refinery  which 
had  been  built  in  Toledo  in  opposition  to  the  trust  refineries. 
The  companies  discriminated  against  some  customers  and  in 
favor  of  others.  The  power  to  say  which  manufacturer  should 
have  cheaper  fuel  than  his  competitor  was  a  power  to  enact 
prosperity  or  ruin." — Id.,  305-306.  It  is  the  story  of  Toledo's 
struggle  against,  and  its  final  hard  won  victory  over  this  gas 
combination  that  is  told  by  Lloyd  in  the  above  mentioned  chap- 
ters of  his  book — a  struggle  by  "a  vigorous  community  of  90,000 
people"  against  "a  little  group  of  men,"  a  group,  however,  con- 
trolling "in  one  aggregation  not  less  than  $160,000,000,  besides 
large  affairs  outside  of  this" — a  struggle  in  which  the  sand-bag- 
ging attempts  above  mentioned  were  ever  at  a  pitch  of  dramatic 
intensity — a  struggle  in  which  the  nefarious  possibilities  of  a 
huge  aggregation  of  private  capital  were  seen  at  their  worst,  and, 
so  seen,  serving  to  keep  awake  in  the  minds  of  the  people  a  deep 
fear  of  ^such  aggregations,  even  when  seen  at  their  best;  making 
them  as  regards  the  treatment  which  they  should  receive,  the 
evil  which  they  are  thought  to  be.  Thus  the  "worst  or  least  cle- 


HERTIG    ON    TAXATION.  155 

sirable"  of  such  aggregations  shall  fix  the  standard  of  apprehen- 
sion and  regulation  for  all  of  them. 

If  one  personally  knowing  here  and  there  an  individual  mem- 
ber of  the  American  plutocracy,  judge  him  merely  according  to 
first  impression  and  the  dull  and  prosy  appearance  of  the  man, 
it  will  seem,  in  comparing  such  plutocrat  to  Nero,  and  using 
Napoleon  to  light  up  the  whole  with  the  brilliancy  of  vast  and 
genuine  ambition — it  will  seem,  at  first  blush,  plain,  very  plain, 
almost  frivolously  plain,  that  the  American  plutocrat,  partly 
from  temperament,  partly  from  the  unescapable  limitations  of 
his  local  surroundings,  is,  to  borrow  a  horsey  illustration  from 
flash  circles,  merely  as  a  tame  plug  to  a  thoroughbred,  along- 
side the  real  thing  in  vice  or  the  real  thing  in  ambition.  If, 
however,  disregarding  first  impressions,  one  puts  off  comparison 
until  one  has  followed  in  detail  certain  colossal  operations  bear- 
ing the  plutocrat  stamp,  and  has  marked  the  worst  and  truly 
hideous  features  there  apparent, — then  it  will  seem  equally  plain 
that  Neronocracy  and  American  plutocracy  differ  chiefly,  in  that 
the  latter,  with  a  cunning  never  developed  in,  because  the  need 
of  it  was  little  felt  by,  the  former,  recognizes  certain  fettering 
conditions  which  it  cannot  openly  transcend,  and  to  get  around 
which  by  secret  breaking  or  marvelous  stretching,  it  does  not 
scruple  to  use  every  power  and  resource  at  its  command — doe^ 
not  scruple  to  use  such  power  and  resource  with  as  shameless 
defiance  of  public  and  private  right  and  as  flagrant  breach  of  the 
moral  law  as  any  such  defiance  or  breach  practiced  by  Nero  in 
the  exercise  of  that  unbounded  "dominion  over  sea  and  sky 
which  a  Caesar  possessed,"  and  which  "there  is  no  term  in  Eng- 
lish to  convey."  The  details  of  a  Nero's  vice  grossly  shock  the 
Puritan  ear,  but  should  a  Puritan  conscience  be  really  more 
shocked  by  them  than  by  some  of  the  crimes  of  plutocracy?  No 
member  of  the  Baptist  church,  "in  s^ood  standing,"  will  imitate 
Commodus  outdoing  Nero,  and,  like  Commodus,  promenade 
"in  the  attributes  of  a  priest  of  Anubis  through  a  seraglio  of  six 
hundred  girls  and  mignons"  who  exemplify  their  purpose  in  life 
as  he  passes.  It  may  be  freely  conceded  that  no  member  of  that 
church,  in  good  standing  or  otherwise,  will  think  of  setting  up 
such  seraglio  either  for  himself  or  for  any  legislature  that  he 
may  desire  to  buy.  It  would  be  both  too  scandalous  and  too  un- 
necessarily dear.  But  when  Henry  C.  Payne,  in  1884,  bought 
his  way  to  the  senate  of  the  United  States  through  the  then 
Democratic  legislature  of  Ohio,  it  is  no  strain  on  the  imagina- 
tion to  conceive  him,  in  view  of  the  nefarious  practices  of  his 
associates,  some  of  whom  are  and  some  of  whom  are  not  mem- 
bers of  said  church — no  strain  to  conceive  him  or  them  as 


156  HERTIG     ON     TAXATION. 

shrinking  from  no  kind,  quality,  or  scale  of  debauchery  that 
would  help  wicked  purpose  to  success.  When  cold  cash  affords 
the  cheapest  and  safest  means,  there  is,  of  course,  no  question  of 
anything  else.  "Entities,"  said  Occam  with  his  Razor,  "must 
not  be  multiplied  beyond  necessity;"  moral  or  legal  codes,  thinks 
Rockefeller  with  his  Standard  Oil,  must  not  be  shocked  beyond 
necessity. 

Modern  brigandage  achieving  the  colossal,  would  sometimes 
atone,  or  forget,  or  deceive,  by  splendid  giving.  But  Nero  was 
"splendidly  lavish,"  and  for  awhile  achieved  with  the  Roman 
masses  an  adoring  popularity.  "For  days  and  days  in  the 
Forum  there  was  an  incessant  shower  of  tickets  that  were  ex- 
changeable, not  for  bread  or  trivial  sums,  but  for  gems,  pictures, 
slaves,  fortunes,  ships,  villas  and  estates." — Imperial  Purple,  103. 
Caracalla,  who  "bounded  like  a  panther  on  to  the  throne,"  and 
who  "had  not  a  taste,  not  a  vice  even,  which  was  not  washed  and 
rewashed  in  blood," — was  a  prodigal  giver  to  his  soldiers,  and  by 
them  adored,  despite  the  universal  execration  in  which  others 
held  him.  "No  pne  had  abandoned  to  the  army  such  booty  as 
he." — Id.  224.  But  in  these  days,  though  a  gift  doth  still  "blrul 
the  eyes  and  pervert  the  judgment  of  the  righteous,"  it  is  not 
necessarily  effective  unto  total  blindness  and  complete  perver- 
sion. Gifts  to  universities  and  colleges  easily  recoil.  A  profes- 
sor may  be  meek,  and  duly  grateful  to  the  hand  that  endows, 
but  he  may  also  prove  a  flaming  firebrand  plucked  from  the 
quenched;  and  his  students,  like  standard  oil  at  times,  are  always 
likely  to  blaze  out  under  low  initial  heat. 

Does  it  follow  that  a  plutocrat  of  the  most  objectionable  type 
is  necessarily  a  canting  hypocrite,  because  he  robs  and  prays? 
A  question  not  to  be  answered  lightly,  nor  to  everybody's  satis- 
faction. In  the  non-logic  of  many  a  mind,  and  in  the  non-con- 
sistency of  many  a  character,  two  contradictory  propositions  are 
each  true,  and  two  conflicting  actions  are  each  genuine.  That 
contradiction  which  Hawthorne,  and  Shelley  before  him,  noted 
in  the  Italian  character,  deeply  religious  yet  damnably  vicious, — 
is  by  no  means  rare  outside  of  Italy.  Perhaps  we  may  safely 
say  that  when  the  American  business  man  develops  into  a  pluto- 
crat, he  does  not  necessarily  lose  entirely  his  conscience,  but 
that  he  treats  it  much  as  any  account  is  treated  in  bookkeeping. 
Thus,  during  the  Civil  War  a  New  England  patriot  made  larcre 
gains  as  secret  Dartner  in  vessels  and  cargoes  "running  the 
blockade."  It  was  not  quite  right  to  supply  the  rebels  with 
necessaries  even  at  a  bumper  price ;  a  balance  therefore  was  due 
to  Conscience  on  open  account.  So  this  same  Yankee  mikes 
amends  by  arming  and  equipping  at  his  expense  a  regiment  of 


HERTIG     ON     TAXATION.  157 

New  England  volunteers,  and  presents  them  to  the  government 
at  Washington  to  go  against  the  rebels  to  whom  his  blockade- 
runners  were  carrying  aid  and  comfort!  At  any  rate,  whatever 
the  motives  that  inspired  to  a  partial  balancing  of  the  Conscience 
account,  let  us  be  thankful  that  the  rogues  of  today  are  not  in- 
sensible to  those  motives.  And  at  the  same  time,  let  us  remem- 
ber for  practical  guidance  that  the  right  opportunity  to  rob  sel- 
dom fails  to  develop  the  right  robber,  and  is  not  likely  to  fail 
because  such  person  has  a  particular  creed  or  none  at  a1!.  Or,  as 
the  old  German  saying  runs,  "Make  a  sheep  of  yourself,  and 
wolf's  teeth  are  sure  to  find  you." 

From  the  standpoint  of  the  public,  none  of  the  great  brigands 
have  a  cleaner  record  than  James  J.  Hill.  As  Napoleon  finding 
the  crown  of  France  lying  in  the  mire,  picked  it  up  with  his 
sword,  so  Hill  finding  a  railroad  crown  unclaimed  and  vacant 
picked  it  up,  and  got  a  better  title  to  it  than  Napoleon  to  the 
crown  of  France ;  there  was  no  pretender,  Bourbon  or  otherwise, 
to  Hill's  crown.  The  public  was  silent;  it 'had  neither  voice  nor 
organ;  it  was  not  conscious  of  its  latent  claim.  In  so  far  as  it 
had  done  anything,  it  had  given,  by  implication,  a  general  invita- 
tion to  anyone  who  would  to  come,  pick  up  and  appropriate  to 
his  individual  use.  Hill  came,  picked  up,  and  appropriated.  As 
titles  go  in  such  kind,  than  his  none  could  be  better.  But  the 
New  Jurisprudence  will  teach  that  the  public  is  not  estopped  by 
any  informal  action,  nor  bound  beyond  a  reasonable  time  by  any 
compact,  however  solemn ;  and  the  public  will  find,  if  necessary 
to  resort  to  hanging,  a  constitutional  way  to  hang  a  few  old 
judges,  a  few  other  old  officials,  and  even  a  few  old  lawyers,  who 
may  prove  officiously  obstructive  of  the  New  Jurisprudence. 

Certain  truisms  are  so  seldom  said — such  is  human  cowardice 
in  shrinking  from  exact  inventory  of  what  it  dare  not  deny — that 
they  sound  in  the  saying  revolutionary  and  murderous ;  as, 
for  instance,  the  truism  implied  in  the  words,  "resort  to  hanging," 
in  the  preceding  paragraph.  It  is  not  denied  that  the  people  have 
the  right  to  change  to  any  namable  extent  their  political  consti- 
tutions and  their  civil  and  criminal  laws.  The  right  to  hang  is 
necessarily  coextensive  with  the  right  to  make  laws  concerning 
hanging.  The  conditions,  therefore,  which  give  individual  im- 
munity from  the  halter,  lie  only  in  power  to  persuade  the  effective 
majority  that  the  individual  ought  not  to  be  hanged.  A  hypo- 
thetical necessity  for  hanging  becomes  an  actual  necessity  only  if 
and  when  the  effective  majority  so  conceive  it.  I  do  not  predict 
the  necessity,  but  mention  merely  one  of  the  legal  results  that 
could  readily  flow  from  it,  should  it  occur.  Nor  would  such  neces- 
sity be  any  the  less  a  necessity,  shouM  its  results  be  deplorable. 


158  HERTIG    ON    TAXATION. 

For  the  rest,  I  speak  here  only  of  hanging  within  the  form  of  law, 
and  of  what  the  people  can  and  may  do  in  their  sovereign  capacity, 
whenever  they  take  that  view  of  it. 

As  for  Hill  individually,  no  doubt  he  holds  himself  to  be  in  a 
certain  sense  a  trustee  for  the  public.  To  transform  volunteer, 
irresponsible  trustees  into  those  solemnly  appointed  and  who 
will  account  to  the  public  along  the  right  lines  and  administer 
from  right  motives — is  a  step  which  the  public  will  yet  take. 
Hill  has,  or  at  least  had,  all  the  virtues  of  the  best  brigands,  or 
chiefs,  of  the  old  school, — virtues  whose  code  is  very  concise, — 
Be  good  to  the  family,  be  good  to  the  class,  and  levy  all  the  trib- 
ute you  can  on  the  rest.  He  has  also  the  modern  administrative 
virtues  of  a  Napoleon — no  sly  peculation  allowed,  no  detail 
skamped,  unquestioning  obedience  to  the  head — a  head  never  at 
a  loss  to  give  orders,  and  a  headsman's  hand  for  any  officer  or 
other  employe  that  fails  to  obey  them.  Taken  when  not  too 
hardened  in  brigandage  to  be  open  to  the  right  civil  ideals,  any 
man,  potentially  a  Hill,  can  be  made  of  inestimable  value  to  the 
public. 

Finally,  as  for  Hill  individually,  Hill  the  worker,  given  to 
neither  wine  nor  women,  yet  not  fired  by  the  highest  ideals,  Hill, 
the  practical  man  finding  relief  from  heavier  burdens  in  walks 
about,  and  attention  to,  his  farm  at  Hazelhurst, — this  Hill  has 
a  weakness  that  particularly  exemplifies  honest  Sancho's  pro- 
verb— "the  belly  must  be  filled  with  hay  or  with  straw."  This 
weakness,  the  straw  on  which  he  feeds,  lacking  the  nourishment 
afforded  by  higher  ideals,  is  the  love  of  diamonds !  Not  diamonds 
to  wear,  but  diamonds  as  a  strictly  private  weakness — glittering 
unmounted  stones  to  look  at,  stones  by  the  handful  and  basket- 
ful. It  is  said  that  he  requests  certain  large  dealers  in  these 
baubles  to  sell  none  of  unusual  size  or  other  peculiarity  without 
giving  him  a  chance  to*  buy,  if  the  diamond  in  question  should 
tickle  his  fancy.  I  cannot  think  that  he  philosophizes  over  his 
heap  of  brilliants  as  Balzac  makes  Gobseck  philosophize  over 
his  gold;  nor  yet  that  he  has  a  scientific  interest  in  them  that 
would  survive,  if  by  new  mines,  or  by  art,  diamonds  should  be- 
come almost  as  cheap  as  glass;  nor  yet  that  he  contemplates 
them  as  wealth  in  highly  portable  shape  against  the  necessity 
of  flight  in  revolutionary  or  other  contingency.  I  therefore  put 
down  his  love  of  diamonds  merely  as  a  vulgar  weakness,  like 
that  further  one — now  that  he  is  more  exposed  to  Wall-street 
contagion,  and  has  become  a  garrulous  old  man — lately  evi- 
denced in  his  remark,  on  hearing  that  Gates,  the  jovial  Chicago 
iron-and-steel  pirate,  is  about  to  build  a  magnificent  yacht :  "I'll 
build  one  that  will  make  that  moonlighter's  look  like  a  foundered 


HERTIG    ON    TAXATION.  159 

canal-boat  with  a  lantern  in  it!"  It  would  be  interesting,  in  this 
connection,  to  know  in  just  what  words,  spoken  or  thought,  J. 
Pierpont  Morgan  marked  the  superlative  excellence  of  the  gor- 
goeus  Christian  special  train,  fraught  with  himself  and  clergy- 
men, which  made  triumphal  entry  last  fall  into  San  Francisco— 
as  compared  with  the  lowly  ass  on  which  Jesus  entered  Jerusa- 
lem. A  pity,  too,  that  history  has  not  preserved  the  piquant 
comparison  made  by  Commodus,  when,  scheming  to  outdo  Nero, 
he  planned  to  strut,  priest  of  Anubis,  through  that  "seraglio  of  six 
hundred  girls  and  minions."  Truly  this  would  be  a  sad  world 
without  competition. 

That  the  power  to  tax  is  the  power  to  destroy  is  an  axiom 
of  the  old  jurisprudence;  that  the  power  to  tax  is  co-extensive 
with  legislative  discretion,  is  also  admitted;  that,  as  applicable 
to  this  country,  the  legislatures  have  full  discretionary  power,  as 
regards  taxation,  except  in  so  far  as  the  people  have  chosen  to 
restrict  that  power  by  written  constitutional  limitations,  which 
the  people  can  amend  or  abrogate  at  will,  is  not  denied,  unless 
in  an  occasional  suggestion  that,  in  any  event,  some  heed  must 
be  given  to  natural  justice;  that,  on  final  analysis,  the  citizen  face 
to  face  with  the  full  power  of  the  state,  has  no  right  but  the 
right  to  his  own  righteousness,  has  been  boldly  affirmed  by 
tax  officials  in  Boston;  that  the  powers  of  darkness  under  cover 
thereof,  have  stolen  and  hidden,  without  deigning  even  to  pay 
tax  on  their  plunder,  has  so  smitten  the  reform  professors  that 
they  have  risen  in  their  might — a  might  that  proudly  fancies  it- 
self equal  to  the  task  of  "reaming  out"  a  little  the  dribbling 
spigot  of  corporate  taxation,  but  quakes  in  the  knees  at  the  very 
thought  of  using  the  above  sledge  hammer  of  doctrine  to  do  a 
little  tapping  at  the  bung-hole! 

I  make  frank  confession  of  looking  at  the  problem,  or 
problems,  in  a  different  light.  In  this  and  the  last  pre- 
ceding chapter,  I  have  placed  together  certain  facts  and  compar- 
isons pertinent  to  be  borne  in  mind  by  whoever  would  govern 
wisely  in  the  taxing  as  in  other  departments — wisely  in  the 
Northwest  or  elsewhere.  At  least  a  partial  inventory  of  the 
"powers  of  darkness"  in  their  realities  and  possibilities  is  highly 
necessary  to  whoever  would  be  successful  "children  of  light." 
At  the  same  time  I  have  made  it  apparent  and  would  make  it 
emphatic,  that  the  particular  powers  of  darkness  in  these  chap- 
ters examined  are  not  entirely  black  either  in  intent  or  in  prac- 
tical effect.  Rule  and  probable  ruin  by  a  few  overgrown  pluto- 
cratic swine  are  at  least  a  shade  better  than  rule  and  sure  ruin 
-by  an  army  of  pauperocratic  pigs.  Be  it  mine  to  refute  as 
frankly  and  earnestly  the  theory  that  we  are  limited  to  such  al- 


160  HERTIG    ON    TAXATION. 

ternative  as  it  is  mine  to  confess  that  one  branch  thereof  holds 
us  in  confident  grasp.  Be  it  mine  to  admit  that  a  sudden  and 
permanent  increase  in  tax  revenue  from  sources  that  have  here- 
tofore been  comparatively  dry,  may  not  prove  an  unmixed  good, 
and  certainly  will  not,  unless  it  runs  safely  the  guantlet  of  danger 
that  new  revenues  will  lead  to  new  and  indiscreet  expenditures 
without  lightening  materially  present  burdens.  Reform,  then, 
in  tax  expenditure  is  even  more  vital  than  reform  in  tax  collect- 
ing. The  plutocratic  hoard  that  grows  by  all  the  plutocratic 
methods,  including  non-payment  of  taxes,  will  be  for  the  very 
reason  that  it  consists  mostly  of  visible  properties,  always  reach- 
able by  the  state  whenever  the  state  shall  really  want  it ;  whereas 
the  funds  and  labor  squandered  on  indiscreet  public  expenditure 
are  so  much  wasted  wealth,  and  breed  to  boot  a  swarm  of  par- 
asites who  increase  the  complexity  of  problems  of  government. 
Corporate  bonds  and  shares  may  be  hidden,  it  is  true;  but  the 
properties  on  which  they  are  based  are  always  in  plain  sight. 
The  new  jurisprudence  will  see  to  it  that  violation  of  express  or 
implied  conditions  in  corporate  charters,  works  forfeiture  of  cor- 
porate franchises  not  in  theory  alone,  but  in  fact  and  in  practi- 
cal effect — forfeiture  as  to  which  no  statute  of  limitations  shall 
run  against  the  people — forfeiture  from  whose  date  the  further 
exercise  of  the  forfeited  franchises  by  the  delinquent  corpora- 
tions or  their  assigns  shall  be  construed  to  be  a  mere  license 
revocable  at  the  people's  will,  unless  extended  by  solemn  com- 
pact for  a  reasonable  term  under  rigid  conditions  of  control — 
forfeiture  to  be  retrospective  in  effect  and  to  date  from  the  time 
of  the  first  violation  of  such  express  or  implied  conditions,  a 
point  of  great  importance  in  determining  the  value  of  such  cor- 
porations as  between  them  and  the  people,  when  and  if  the  people 
want  to  take  them  over.  For  instance,  a  corporation  which  has 
long  used  and  enjoyed,  by  the  neglect  of  the  public  authorities, 
valuable  franchises  which  the  new  jurisprudence  will  declare 
ought,  of  good  legal  right,  to  have  been  adjudged  forfeited  for 
breach  of  conditions  years  lief  ore  the  judgment  of  forfeiture  shall 
have  been  actually  pronounced — will  have  its  properties  appraised, 
when  the  people  want  them — less  of  course,  all  present  value  of 
their  franchises,  and  less  the  fair  annual  value  of  the  franchises 
from  the  retrospective  date  of  their  forfeiture,  compounded  at 
current  interest  to  the  date  of  such  appraisement  and  taking 
over. 

Neither  the  gentlemen  who  cultivate  the  practical  side  of 
jurisprudence  for  the  fees  it  brings  them,  nor  the  gentlemen 
elected  or  appointed  from  among  them  to  judgeships — have  had 
much  occasion  to  ponder  upon  and  elaborate  that  implied  bur 


HERTIG    ON    TAXATION.  161 

mighty  principle,  lurking  in  every  system  of  jurisprudence, — the 
ultimate  protection  of  each  and  every  property  right  rests  wholly 
upon  the  state  conscience;  and  any  property  may  be  taken,  nay, 
will  be  taken,  on  just  such  terms  as  the  state  (or  national)  con- 
science shall  choose  to  impose.  This  conscience,  as  at  present 
working,  permits  property  to  be  taken  (unless  owner  and  taker 
make  private  agreement  as  to  terms)  only  at  its  fair  appraised 
value,  to  be  determined  in  condemnation  proceedings  either  di- 
rectly on  the  part  of  the  state,  or  by  those  wham  it  authorizes 
to  so  acquire  property  for  some  purpose  of  public  utility.  The 
whole  doctrine  of  "vested  rights"  is  merely  a  permissive  decree 
of  the  state  (or  national)  conscience,  revocable  at  will,  and  of  no 
standing  before  the  people's  inalienable  and  superior  right.  The 
new  jurisprudence  will  ever  bear  this  doctrine  in  mind  and  de- 
velop it,  but  develop  it  equitably. 

"We  cannot  exterminate  the  race  of  briars  without  slaying 
the  rose  of  Damascus/'  (DONISTHORPE,  Law  in  a  Free  State}  ; 
and  the  New  Jurisprudence  and  the  new  civil  polity  will  forget 
neither  this  nor  any  reasonable  limitation. 


CHAPTER  XII 


Minnesota  to  the  tax  front — Unpledged  legislative  discretion — Mandate  and 
membership  of  'the  Minnesota  tax  commission — Gov.  Van  Sant  calls 
special  session — American  tax  reform  movements  make  leaps  and 
bounds  in  the  dark — Versatile  individuality  of  Minnesota  legislature — 
How  handicapped— LThe  right  autocrat  (or  the  right  organized  idea) 
lacking. 


With  the  foregoing  facts  and  considerations  to  pave  the  way, 
and  with  a  caution  against  any  hasty  conclusion  on  the  reader's 
part  which  he  may  draw  from  the  last  preceding  chapter,  let  us 
see  how  the  vigorous  commonwealth  of  Minnesota  grasped  its 
problems  of  taxation  through  its  constituted  authorities,  in  Feb- 
ruary and  March,  1902,  when  an  extra  session  of  the  legislature 
was  held  for  the  special  purpose  of  grappling  with  the  tax  prob- 
lems. It  had  been  neither  chosen  for  such  purpose,  nor  "in- 
structed" thereon  by  its  constituents.  Probably  no  individual 
member  voted  on  any  measure — or  could  have  voted,  save  in 
strictly  local  matters — in  such  a  way  as  to  subject  him  to  very 
sharp  censure  on  the  part  of  the  great  body  of  his  constituents. 
The  House  of  Representatives  had  been  elected  in  1900,  when 
also  half  the  Senate  was  .chosen — the  other  half  having  been 
elected  in  1898.  By  the  state  constitution,  senators  have  terms 
of  four  years — those  in  the  odd  numbered  and  in  the  even  num- 
bered districts,  holding  alternately  for  two  years  longer  than  the 
House  with  which  they  were  elected.  Minnesota  from  the  stand- 
point of  practical  politics  is  a  "doubtful"  state  in  "off  years," 
but  has  never  failed  to  go  Republican  at  presidential  elections. 
Her  present  legislature  is  largely  Republican,  and  her  state  ot- 
ficers,  as  well  as  her  congressional  delegation,  entirely  so. 

This  legislature,  at  its  regular  session  in  1901,  authorized  the 
governor  to  appoint  a  tax  commission  to  consist  of  three  mem- 
bers and  to  report  not  later  than  the  first  of  February,  1902. 
The  act  so  authorizing  prescribed  the  duties  of  the  commission, 
as  follows:  "The  duties  of  said  commission  shall  be  to  make 
a  tax  code  for  the  State  of  Minnesota.  Such  code  shall  include 


HERTIG    ON    TAXATION.  163 

a  complete  system  for  the  just  and  equitable  taxation  of  all  forms 
of  property  both  tangible  and  intangible,  and  shall  be  properly 
indexed  and  proposed  in  the  form  of  a  bill  or  bills  for  presenta- 
tion to  the  legislature.  Said  code  shall  include  provision  for  a 
permanent  tax  commission  and  shall  define  its  duties,  powers 
and  compensation.  The  commission  shall  also  prepare  and  re- 
port a  bill  or  bills  providing  for  any  constitutional  amendments 
which  may  be  necessary  for  properly  carying  out  the  system  of 
taxation  recommended  by  the  commission." 

On  January  10,  1902,  the  Tax  Commission  duly  reported  to 
the  Governor  its  preliminary  work  and  recommendations  in  59 
pages,  its  proposed  tax  code  in  308  sections,  filling  119  pages, 
and  its  proposed  constitutional  amendments  in  two  pages.  W. 
J.  Hahn,  H.  W.  Childs  and  G.  S.  Ives,  prominent  citizens  of  the 
state,  were  the  three  members  of  the  commission.  Mr.  Hahn 
had  been  attorney  general  of  the  state  for  the  six  years  ending 
January  5,  1887;  Mr.  Childs  had  held  the  same  office  for  the  six 
years  ending  January  2,  1899;  Mr.  Ives  had  been  lieutenant 
governor  of  the  state  for  the  two  years  ending  January  3,  1893, 
and,  like  his  colleagues  on  the  commission,  is  a  lawyer  of  ability 
and  experience. 

Upon  the  filing  of  the  commission's  report  Hon.  S.  R.  Van 
Sant,  governor  of  the  state,  issued  his  proclamation  calling  the 
legislature  to  convene  in  extra  session  on  the  4th  of  February. 
In  his  message,  at  the  opening  of  the  extra  session  the  governor 
called  attention  amongst  other  things  to  the  fact  that  the  legis- 
lature in  its  session  of  1901,  "was  practically  unanimous  in  ap- 
proving the  bill  providing  for  a  commission,  there  being  only 
eight  votes  recorded  against  it,  four  in  the  house  and  four  in 
the  senate;"  that,  in  order  to  consider  the  commission's  report 
and  enact  its  measures  into  laws  as  soon  as  possible,  the  regular 
session  of  1901  had  been  adjourned  before  the  expiration  of  the 
90  legislative  days  to  which  the  state  constitution  limits  any  ses- 
sion,— the  object  of  such  earlier  adjournment  in  1901  being  "that 
the  subject  matter  of  the  report  of  the  commission  and  the 
measures  proposed  might  be  taken  up  in  extra  session  without 
additional  expense  to  the  state;"  that,  owing  to  the  need  of  mort 
effective  tax  legislation,  "it  was  tacitly  understood  that  if  your 
general  session  was  shortened,  you  would  be  called  together  in 
extraordinary  session  immediately  after  the  report  of  the  com- 
mission for  the  purpose  of  affording  an  early  opportunity  to  con- 
sider the  measures  proposed,  and  to  enact  such  laws  as  you 
might  deem  just  and  wise."  It  is  always  a  serious  step,  as  things 
go  in  American  politics,  to  convene  an  extra  session  of  a  state 
legislature.  The  people  at  large,  seeing  the  bulk  of  the  statutes, 


164  HERTIG    ON    TAXATION. 

a  balk  increasing  with  each  successive  session,  dimly  apprehend 
that  the  need  is  not  of  more  but  of  more  discreetly  and  more 
sparingly  framed  laws.  Sins  of  omission  and  commission,  likely 
to  occur  at  any  session,  are  apt  to  recoil  on  the  party  in  power 
for  the  time  being,  more  particularly,  in  the  case  of  an  extra  ses- 
sion, on  the  governor  who  called  it.  Governor  Van  Sant,  there- 
fore, prudently  made  it  apparent  that  he  had  not  lightly  used 
his  authority  in  calling  the  extra  session.  In  any  event,  he  de- 
serves the  thanks  of  the  state  for  having  so  called. 

On  the  urgency  of  tax  legislation  in -Minnesota,  and  the  get- 
ting of  it  through  a  commission,  the  governor  said  in  his  mes- 
sage :  "It  is  a  matter  of  common  knowledge  that  for  many  years 
there  has  been  a  universal  demand  in  our  state  for  a  commission 
clothed  with  the  duty  of  preparing  more  efficient  tax  laws.  The 
creation  of  such  a  commission  has  long  been  urged  by  the  pub1 
lie  press,  has  been  recommended  by  many  of  my  predecessors. 
and  earnestly  advocated  by  our  state  auditor  whose  duties  in 
tax  matters  make  him  especially  familiar  with  the  defects  of  our 
present  tax  system."  What  Governor  Van  Sant  says  in  this 
passage  may  be  truthfully  said,  with  some  modifications,  of  near- 
ly all  the  states  of  the  Union ;  but  the  principal  modification  to 
be  made  as  well  for  Minnesota  as  for  most  of  the  other  states  is 
to  substitute  for  the  words  "a  universal  demand,"  etc.,  the  words 
"a  growing  interest  in  and  demand  for  reforms  in  levying  and 
collecting  taxes  under  the  laws  of  the  several  states  of  our 
Union."  As  a  matter  of  fact,  such  interest  and  demand  are  neith- 
er universal  nor  well  considered,  neither  well  organized  in  means 
nor  well  fixed  in  aims.  The  tax  reform  movement  is  permeated 
with  the  anarchy  that  now  prevails  with  reference  to  the  proper 
sphere  and  functions  of  government  in  general — not  the  theo- 
retical anarchism  that  hopes  by  force  or  otherwise  that  all  gov- 
ernment will  in  time  come  to  an  end,  but  the  good  old  fashioned 
anarchy  of  confusion  and  conflict,  with  neither  leader  nor  con- 
quering principle  in  evidence,  unless  I — but  that  is  another 
story. 

On  February  4th,  then,  1902,  what  may  be  known  to  history 
as  ''the  First  Tax  Legislature  of  Minnesota,"  began  to  sit  in  ex- 
tra session — a  legislature  composed  of  sixty-three  senators,  and 
one  hundred  and  nineteen  representatives.  The  lieutenant  gov- 
ernor of  the  state,  being  bv  virtue  of  his  office,  president  of  the 
senate,  virtually  makes  the  number  of  senators  sixty-four.  In 
the  present  senate,  lawyers  are  much  in  evidence,  and  prepon- 
derate in  influence.  This  is  not  surprising,  when  the  president 
of  that  body  and  twenty-six  senators  proper  are  members  of  the 
legal  profession,  or  a  total  of  42  per  cent  of  the  whole.  Other 


HERTIG    ON    TAXATION.  165 

professions  and  occupations  are  numerously  but  scatteringly  rep- 
resented. There  are  seven  merchants,  five  editors,  three  lum- 
bermen, two  manufacturers,  and  two  farmers.  There  is  one 
pharmacist,  one  physician,  one  banker,  one  dealer  in  farm  ma- 
chinery, one  produce  commission  merchant,  one  compositor,  one 
contractor,  one  general  life  insurance  agent.  Not  classified  with 
any  of  the  foregoing,  are  those  leading  double  or  triple,  lives 
from  the  standpoint  of  occupation, — one  druggist-banker,  one 
who  is  farmer,  banker  and  dealer  in  agricultural  implements,  one 
who  runs  a  saw  mill,  a  flouring  mill,  a  general  store  and  a  large 
farm,  one  who  is  railroad  contractor,  miller,  hardware  merchant 
and  lumber  dealer,  one  who  sells  real  estate,  negotiates  loans 
and  writes  insurance,  one  who  does  the  same,  bar  loans,  one  who 
runs  a  bank  and  a  law  office,  one  who  is  a  con- 
tractor and  civil  engineer.  Two  senators  still  unclassi- 
fied, but  endowed  with  the  usual  American  versatility,  may,  from 
the  leading  fruitage  of  their  strenuous  lives,  be  put  down  as  of- 
fice-holders. Though,  in  general,  office-holding  on  the  part  of 
the  senators  appears  to  be  only  a  side  line,  so  to  speak,  in  their 
lives,  it  seems  that  only  six  members  out  of  the  entire  body 
"never  before  held  office."  Numerically  speaking,  the  offices 
that  lead  to  membership  in  the  senate  of  Minnesota  are,  county 
attorney  ships,  and,  if  I  may  launch  a  quasi  bull,  getting  elected 
to  one  branch  or  the  other  of  prior  legislatures.  No  less  than 
twenty-one  of  the  senators  have  "been  to  the  legislature  before," 
and  fifteen  of  them  have  held  the  office  of  county  attorney.  Two 
senators  have  been,  respectively,  governor  and  attorney  general 
of  the  state.  About  a  dozen  have  been  aldermen  or  members  of 
some  city  or  village  council.  Ex-county  officers,  other  than 
county  attorneys,  make  a  scattering  show,  but  a  considerable 
aggregate, — county  auditor,  register  of  deeds,  judge  of  probate, 
clerks  of  district  court,  treasurers,  commissioners,  etc.  Ex- 
mayors,  about  half  a  dozen.  Esthetics  and  finance  are  jointly 
represented  by  an  ex-member  of  a  board  ol  park  commissioners. 
To  lead  in  a  "campaign  of  education,"  and  shed  light  upon  their 
colleagues,  are  ex-county  superintendents  of  schools,  ex-presi- 
dents of  boards  of  education,  and  ex-holders  of  "numerous  vil- 
lage and  school  offices."  The  mild  effulgence  of  American  high, 
normal,  collegiate  and  university  schools  lit  up  the  earlier  path 
of  many  a  senator.  Of  the  few  who  have  had  "only  a  common 
school  education,"  none  flaunt  signal  of  distress  or  self-distrust 
on  that  account.  The  Civil  War  volunteers  were  all  mustered 
out  of  service  thirty-seven  years  ago;  but  three  veterans  of  that 
war  still  answer  roll  call  in  the  Minnesota  senate.  Of  all  the 
senators,  only  15  were  born  in  Minnesota.  Forty-one  were  born 


166  HERTIG    ON     TAXATION. 

in  the  United  States  outside  of  Minnesota,  of  which  number, 
fifteen  Were  born  east  of  Ohio.  Seven  were  born  in  foreign  coun- 
tries. Hon.  Lyndon  A.  Smith,  lieutenant  governor  and  presi- 
dent of  the  senate,  was  also  born  outside  the  state  and  is  a  native 
of  New  Hampshire.  As  against  the  forty-three  Republican  sen- 
ators, there  are  sixteen  Democrats,  two  Populists,  one  Demo- 
cratic Populist,  and  one  Independent-Republican. 

The  House  of  Representatives  does  not  belie  its  name  and 
is  less  professional  and  more  popular  than  the  Senate.  The 
legal  profession,  though  well  represented  with  twenty-two  mem- 
bers, is  not  overwhelming  in  influence,  and  the  leader  of  the 
House,  Hon.  Jacob  F.  Jacobson,  "the  gentleman  from  Lac  Qui 
Parle  County,"  and  chairman  of  the  committee  on  appropria- 
tions, is  not  a  lawyer,  but  a  dealer  in  farm  machinery.  Of  him 
more  anon.  Thirty-three  members  are  listed  as  farmers — a 
number  considerably  greater  than  that  which  catalogues  any 
other  occupation  of  theirs.  After  the  lawyers,  who  are  second 
in  number,  come  the  merchants,  numbering  eleven,  to  whom, 
however,  should  be  added  about  as  many  more  who  are  mer- 
chants in  a  specialized  way — two  dealers  in  'hardware  and  [agri- 
cultural] implements,"  one  grain  and  produce  commission  mer- 
chant, one  wholesale  produce  dealer,  three  dealers  in  farm  ma- 
chinery, one  dealer  in  "machinery  and  hardware,"  one  lumber- 
man, one  "hardware  merchant."  There  are  five  bankers,  one 
of  whom  is  also  a  practicing  physician.  At  least  ten  of  the 
members  as  listed  in  the  Legislative  Manual  for  1901,  appear  to 
have  no  fixed  profession  or  occupation.  Half  of  this  ten  may 
be  put  down  as  office  holders,  and  the  other  five  are  doubtless 
general  utility  men  in  th'eir  respective  localities.  Mechanical  oc- 
cupations are  scatteringly  represented.  There  is  one  shingle- 
sawyer,  one  printer  (who  is  also  an  editor  and  publisher),  one 
barber,  one  union  labor  champion,  and  one  harness-maker,  who 
does  something  also  in  the  "live-stock"  way.  There  are  two 
physicians,  besides  the  banker-doctor;  and  there  are  two  drug- 
gists, two  hotel-keepers,  two  real  estate  dealers,  and  twice  that 
number  who  to  dealing  in  real  estate  add  insurance,  loans  and 
the  like.  There  is  one  commercial  traveler,  one  life-insurance 
agent,  one  contractor  and  builder,  one  civil  engineer,  one  who  is 
a  printer,  railroader  and  lawyer,  one  who  is  a  real  estate  man 
and  railroad  contractor,  one  teacher  by  profession  and  farmer 
by  occupation,  and  one  editor.  The  editor,  too,  is  a  handy  man, 
having  formerly  been  "engaged  in  railroading,"  and  having 
served  as  recorder  and  sheriff,  also  as  mayor — separate  offices  and 
distinct  terms.  There  is  one  ex-policeman,  and  the  youngest 
member  of  the  house  served  as  a  private  soldier  in  the  i3th 


HERTIG    ON    TAXATION.  167 

Minnesota,  in  the  war  with  Spain.  Seven  of  the  older  members 
were  federal  soldiers  in  the  Civil  War,  one  of  them  rising  to  the 
rank  of  captain  and  two  of  them  to  that  of  first  lieutenant.  Three 
others  have  seen  military  service, — one  "from  March  1864  to 
May,  1866,  in  Brackett's  Battalion,"  another  for  over  three 
years  as  a  "private  in  the  regular  army"  (2oth  U.  S.  infantry), 
the  third  as  lieutenant  in  the  Fifteenth  Minnesota,  raised  for  the 
Spanish  war.  Many  members  have  had  an  amazingly  varied  ex- 
perience— amazing,  if  judged  by  the  standards  of  countries  where 
routine  holds  full  sway.  Thus  one  member  "has  held  numerous 
public  offices,"  been  county  superintendent  of  schools,  published 
the  "first  Democratic  paper"  in  his  county,  was  appointed  post- 
master by  Grover  Cleveland,  was  "U.  S.  pension  examiner  for 
four  years,"  and  surgeon  in  the  fourteenth  Minnesota  (Spanish 
war  regiment),  with  rank  of  lieutenant.  A  little  more  than  two- 
thirds  of  the  members  had  held  office  of  some  kind  before  their 
election  to  this  legislature.  One-fourth  of  them,  speaking  round- 
ly, were  born  outside  the  United  States ;  only  one-fifth,  still 
speaking  roundly,  were  born  in  Minnesota ;  the  others,  sixty-four, 
were  born  in  the  United  States,  but  outside  of  Minnesota,  twen- 
ty-four having  been  born  in  states  east  of  Ohio.  The  House 
is  even  more  overwhelmingly  Republican  than  the  Senate, — 
nearly  a  hundred  of  the  119  members — or,  to  speak  by  the  card 
and  the  blue-book,  ninety-five — being  of  that  party.  There  are 
fourteen  lonesome  Democrats,  and  a  scattering  remainder  of 
Populists,  or  with  an  eye  toward  that  ilk.  Lively  enough  these 
latter,  and  hopeful  with  a  reasoning  that  has  point,  if  not  true 
prophecy :  "The  future  ought  not  to  "be  to  the  Republicans,  can- 
not be  to  the  Democrats,  and  who  shall  inherit,  if  we  do  not?" 

We  may  now  speak  of  this  legislature  entirely  in  the  past 
tense.  While  its  term  does  not  technically  expire  until  the  fall 
election  of  1902  shall  have  given  life  and  a  commission  to  its 
successor,  it  is  practically  as  certain  as  any  contingent  event 
can  be  that  it  will  not  again  be  called  to  meet  in  extra  session. 
Such  then  was  the  legislature  which  met  to  consider  the  subject 
of  taxation — a  body  of  well-meaning-  and  intelligent  men,  not  a 
legislature  to  set  the  seal  of  its  approval  on  anything  manifestly 
scandalous  or  contrary  to  the  public  welfare.  It  was  handi- 
capped as  all  American  legislatures  are,  by  the  fact  that  some- 
thing was  sure  to  be  done,  with  neither  pre-arranged  public  will, 
nor  any  safeguard  against  the  consequences  of  prolix -debate — 
malforming  compromise  and  final  hasty  action.  It  was  further 
handicapped  by  the  difficulties  inhering  in  the  subject  of  taxation, 
and  by  the  worse  difficulties  begotten  of  previous  legislation 
and  the  constraint  of  constitutional  limitations  still  binding. 


168  HERTIG    ON    TAXATION. 

Difficulties  born  of  previous  legislation  prevail  in  substantially 
all  of  the  American  states.  1  am  informed  on  good  authority, 
that  a  gentleman  of  high  place  and  competency,  said  privately 
not  long  ago,  in  speaking  of  the  tax  laws  of  his  state:  "I  doubt 
not  that  the  laws  of  other  states  are  in  as  hopeless  confusion  as 
ours,  but  I  am  accustomed  to  think  that  ours  are  the  most  il- 
logical and  imperfect  with  which  I  have  any  acquaintance.  The 
subject  of  taxation  is  one  which  can  only  be  dealt  with  success- 
fully by  an  intelligent  autocrat.  We  have  plenty  of  intelligence, 
but  too  much  diffusion  of  power  to  reach  a  satisfactory  deter- 
mination." To  vest  the  right  authority  in  the  right  voice  goes 
indeed  to  the  heart  of  the  question.  The  New  Jurisprudence 
and  the  Civil  Nation  will  attempt  its  solution. 


CHAPTER  XIII. 


The  professorial  tendencies  and  regrets  of  the  Minnesota  tax  commission 
— A  study  in  the  assessed  as  compared  with  the  true  values  of  real 
estate — Minnesota,  Iowa,  Wisconsin,  Indiana,  Pennsylvania — Urban 
assessed  relatively  higher  than  rural  property, — Six  general  propositions 
on  values  and  principles. 


The  several  members  of  the  Tax  Commision,  mentioned  in 
the  preceding  chapter,  received  their  commission  on  the  elev- 
enth day  of  April,  1901;  and  they  completed  their  report  in  nine 
months.  The  commissioners  in  the  59  pages  of  said  report  which 
are  taken  up  with  an  account  of  their  preliminary  work  and  an 
apologetic  commentary  on  their  proposed  code,  make  frank  con- 
fession of  the  difficulties  of  their  task — difficult  ''under  the  most 
favorable  circumstances,"  and  vastly  more  so  by  reason  of  the 
provisions  of  the  state  constitution  to  whose  mandates  "they 
had  to  yield." — Report,  p.  4.  The  commissioners  showed  them- 
selves to  be  sicklied  o'er  with  the  pale  cast  of  that  type  of  pro- 
fessorial thought  which  feels  that  great  ^things  are  to  be  done 
some  of  these  days  in  the  domain  of  government  and  the  social 
field — after  more  data  shall  have  been  collected  and  more  books 
written  thereupon. 

"The  commission  deeply  regrets  that  it  was  not  afforded  am- 
ple time  and  means  for  the  accumulation  of  valuable  data  relat- 
ing to  taxation  in  this  state.  This  report  would  have  performed 
a  far  more  instructive  and  useful  function  if  the  commission  had 
been  able  to  present  therein  a  comprehensive  tabulation  of  the 
wealth  of  the  state  under  appropriate  classification.  Legislation 
is  most  wise  which  emanates  from  a  fine  knowledge  of  the  sub- 
ject to  which  it  is  addressed.  [Say  rather  from  a  practical,  work- 
ing knowledge  of  the  temper  and  wants  of  the  people  on  whom 
legislation  is  to  operate.  That  'fineness  of  knowledge'  which 
enables  a  man  to  satisfy  a  board  of  professors  of  his  competency 
is  by  no  means  a  sufficient  guaranty  of  that  man's  fitness  to  leg- 
islate.] 

"Statistics  should  be  marshalled  showing  the  actual  valuation 
of  real  property  in  the  several  counties  of  the  state;  the  valua- 


170  HERTIG    ON    TAXATION. 

tion  of  personal  property  in  cities  and  villages  and  in  the  rural 
districts;  in  tangible  and  intangible  forms;  in  productive  and 
non-productive  uses;  in  investments  in  stocks,  secured  and  non- 
secured  loans  and  bank  deposits,  engaged  in  manufacturing,  job- 
bing, mercantile,  transportation  and  other  public  service  enter- 
prises. 

"There  should  be  a  showing  of  incorporated  companies  class- 
ified with  respect  to  the  purposes  of  organization  disclosing  the 
amount  of  capital  authorized  and  paid  in,  volume  of  earnings 
and  taxes  paid. 

"Such  a  showing  would  have  been  rich  in  suggestions  and  an 
instructive  guide  both  as  to  present  and  future  tax  legislation." 
— Report,  p.  4. 

No  one  puts  a  higher  value  on  facts  than  I  do.  Views  on 
taxation,  or  on  any  subject,  that  do  not  rest  on  the  buttress  of 
solid  fact  are  as  defective  as  a  bridge  built  on  basswood  piers, 
if  such  a  bridge  could  be  found.  But  facts  undigested  and  un- 
assimilated,  facts  supernumerary  and  over-minute,  are  apt  to 
have  the  same  effect  on  the  mind  as  the  shot  with  which  the 
jumping  frog  of  Talaveras  was  filled  had  on  his  legs:  they  cre- 
ate inability  and  indisposition  to  budge.  A  journalist  must  havt 
a  "nose  for  news;"  and  a  fact-user  must  have  a  nose  for  facts, 
must  have  a  judgment  that  singles  out  the  right  sort  from  the 
mass,  and  that  knows  when  it  has  enough.  While,  therefore,  the 
tax  commission  is  to  be  commended  for  its  loyalty  to  fact,  I  can- 
not subscribe  to  its  regrets  nor  to  the  list  of  its  needs  as  above 
set  forth ;  it  underestimated  the  accessibility  and  simplicity  of  the 
right  facts,  and  it  vastly  over-estimated  the  need  of  the  detailed 
local  statistics  which  it  wished  it  had. 

Thus,  as  regards  the  true  value  of  lands  in  comparison  with 
their  assessed  value,  it  had  ready  at  hand  the  official  figures  of 
the  assessed  value  for  all  the  years  that  Minnesota  has  levied 
taxes;  and  I  doubt  if  any  deliberate,  cumbrous  and  expensive 
official  investigation  of  real  values,  scraped  and  faked  together 
for  special  purpose  would  give  even  as  good  an  approximate 
result  as  that  within  the  reach  of  one  competent  private  investi- 
gator who  should  devote  a  few  days  to  that  matter.  True,  the 
facilities  for  such  work  at  St.  Paul,  while  good  in  spots,  and  sup- 
plemented by  the  cheerful  willingness  of  state  officers  and  em- 
ployes to  give  what  aid  they  can, — are  by  no  means  ideally  per- 
fect. Despite  the  general  excellence  of  the  state  library  in  the 
legal  field  which  it  aims  to  cover,  despite  the  valuable  collection 
of  books  and  documents  in  the  Historical  library, — there  is  many 
a  gap  in  the  blue-books  and  official  documents  issued  by  other 
states  in  the  Union.  As  these,  when  issued,  cost  nothing  but 


HERTIG    ON     TAXATION.  171 

the  asking  and  storing,  it  is  hoped  that  when  the  new  capitol  is 
occupied,  both  the  will  and  the  increased  room  will  co-operate 
in  making  and  keeping  the  official  series  complete. 

Now  the  neighboring  state  of  Iowa  has  taken  official  pains 
to  find  the  value  of  acres,  as  determined  by  private  sales,  and  to 
tabulate  that  value  side  by  side  with  the  assessed  value.  Iowa's 
state  board  of  review  requires  each  county  auditor  in  that  state 
to  report  every  ten  years  the  area  of  the  lands  conveyed  on  a 
certain  day,  the  price  received  therefor,  and  "the  assessed  value 
placed  on  the  same  property."  The  day  covered  by  these  reports 
is  March  I,  in,  thus  far,  the  years  1871,  1881,  1891,  and  1901. 
The  figures  thus  obtained  are  extremely  interesting  and  instruc- 
tive : 

March  i,  1871 — 

Acres  sold   24,302 

Price  per  acre $  14.0  ) 

Assessed  value  per  acre 6.00 

Percentage    .43 

March  i,  1881— 

Acres  sold 3 1 ,5 1 7 

Price  per  acre $16.00 

Assessed  value  7 .  oo 

Percentage 44 

March  i,  1891— 

Acres  sold 42,453 

Price  per  acre $27 .  oo 

Assessed  value 1 1 .  oo 

1  'crcentage .41 

March  i,  1901— 

Acres  sold 1 12,660 

Price  per  acre $44 .  oo 

Assessed  value  9 .  oo 

Percentage   .20 

It  will  be  seen  that  the  percentages  of  assessed  value  on  real 
value  are  remarkably  uniform  for  1871,  1881,  and  1891, — a  trifle 
more  than  forty  per  cent  for  each  year.  The  uniformity  of  these 
results  would  indicate  that  the  aggregate  consideration  received 
or  bargained  for  lands  conveyed  in  one  day  of  the  year,  when 
compared  with  the  aggregate  assessed  value  of  the  same  lands  at 
the  same  time,  gives  a  very  fair  average  of  these  respective  values 
for  the  whole  state.  Is  this  inference  weakened  by  the  seemingly 
anomalous  result  obtained  in  1901,  a  cut  of  a  little  more  than 
half  in  the  former  percentage?  Must  we  adopt  as  correct  the 
slang  grammar  of  lies — "lies,  damned  lies,  and  statistics?"  Not 
in  this  case,  at  least.  I  "euess."  in  the  Yankee's  sense  of  the 


172  HERTIG    ON     TAXATION. 

word,  that  there  is  a  simple  explanation.  The  good  people  of 
Iowa  having  some  years  ago  bowled  over  the  demon  "Rum" 
with  prohibitive  statutes,  sighed  for  new  moral  ideas  to  instal? 
in  triumph,  and  thought  to  remove  from  their  statute  book  that 
old  chronic  lie  and  breeder  of  lies, — property  shall  be  assessed  for 
purposes  of  taxation  at  its  "true  cash  value."  So  they  provided 
for  ascertaining  such  value,  and  decreed  by  statute  that  25  per 
cent  of  such  ascertained  true  value  should  be  set  down  as  the  as- 
sessed value — thus  making  law  and  practice  for  once  a  pull-to- 
gether team.  The  25  per  cent  basis  went  into  effect  in  1897,  and, 
such  is  the  tendency  of  human  nature  to  hammer  down  assessed 
values — a  tendency  fostered  and  developed  by  the  prevailing 
statutes  into  unwearying  activity, — that  in  1901  our  Iowa  neigh- 
bors had  already  succeeded  in  getting  the  assessed  value  of  lands 
two  dollars  per  acre  below  the  new  25  per  cent  mark !  The  true 
value  being  then  $44.00  per  acre,  the  average  assessed  value 
should  have  been  $n.oo,  instead  of  only  $9.00  per  acre.  In  1898, 
Illinois  adopted  20  per  cent  of  the  true  value  of  all  kinds  of  prop- 
erty as  the  amount  to  be  set  down  as  the  taxable  or  assessed 
value  thereof. 

The  Iowa  figures,  taking  them  by  separate  counties,  for  1871, 
1 88 1,  and  1891,  are  specially  interesting  as  showing  the  influence 
in  individual  cases  of  what  economists  call  "the  higgling  of  the 
market,"  the  influence  of  assessors'  favoritism,  and  the  like.  Thus 
in  1891,  in  three  counties,  the  assessed  va-iue  equaled  or  exceeded 
the  selling  price, — being  in  one  of  the  three  in  per  cent  of  the 
same,  and  in  another  108  per  cent.  In  the  three  counties  where 
the  percentage  of  assessed  value  was  lowest,  the  figures  are,  re- 
spectively, 15,  23,  and  24  per  cent.  In  1881,  the  three  highest 
percentages  were  175,  175,  and  166;  and  the  three  next  highest 
were  133,  133,  and  120.  Two  others  were  still  above  par — 113 
and  1 02 — while  in  no  les  than  four  counties  the  assessed  just 
equaled  the  selling  or  true  value — standing  at  even  100  per  cent. 
The  low  mark  was  19  per  cent,  reached  by  only  one  county.  The 
two  counties  next  lowest  stood  each  at  20  per  cent.  The  three 
counties  next  lowest  stood  at  25,  28,  and  30  per  cent,  respectively. 
In  1871,  the  high  water  mark,  both  for  the  year  and  the  whole 
record  was  reached  in  Winnebago  county,  where  an  80  acre  tract 
of  land  assessed  at  $3.00  per  acre  was  sold  at  $1.00  per  acre — 
making  the  assessed  value  300  per  cent  of  the  real  value!  In 
five  other  counties  the  percentages  stand  above  par — 135,  133,  133, 
125,  114.  In  four  counties  the  assessed  just  equaled  the  selling 
value.  That  year  made  the  low  as  well  as  the  high  percentage 
mark, — a  90  acre  tract  in  Dubuque  county  selling  for  $67.00  per 
acre,,  and  assessed  at  $6.00  per  acre,  or  9  per  cent  of  the  real  value. 


HERTIG     ON     TAXATION.  173 

The  low  percentages  run  thence,  19,  20,  22,  28,  28,  28,  30,  31,  32, 
32,  etc.  Those  steady  influences,  "the  higgling  of  the  market,"  the 
favoritism  or  neglect  of  assessors,  are  supplemented  by  circum- 
stances easy  to  imagine — a  tract  of  land  selling  on  some  real  or 
supposed  speculative  merit,  or  a  tract  selling  because  some  neigh- 
bor pays  more  than  it  is  worth,  either  to  round  out  his  own  former 
holdings  or  for  other  effective  personal  reasons ;  while,  to  deter- 
mine the  lowest  selling  prices,  there  come  in  sales  in  a  dull  mar- 
ket, or  a  poor  piece  of  land  sold  out  of  a  larger  and  better  tract, 
all  assessed  to  one  owner  at  a  uniform  rate,  or  a  deal  made  on  a 
called  bluff,  or  an  opportunity  offered  by  an  angry  non-resident. 
But  when  an  average  is  made  on  returns  from  nearly  100  counties, 
and  that  average  for  three  decennial  years  is  almost  the  same,  it 
may  be  assumed  that  the  special  factors  that  make  respectively 
for  high  and  low  very  nearly  cancel  each  other — sufficiently,  at 
least,  for  practical  purposes.  The  Minnesota,  then,  or  any  tax 
commission,  could  have  safely  assumed,  from  readily  accessible 
data,  that  in  states  like  Iowa  and  Minnesota,  where  no  improved 
"jacking-up"  machinery  has  lately  been  installed,  and  where,  for 
the  purpose  of  levying  a  state  tax,  lands  are  attempted  to  be 
"equalized"  in  value  throughout  the  state,  the  assessed  value,  as 
regards  acre  property,  will  not  much  exceed  forty  per  cent  of 
the  fair  market  value  as  ascertained  by  private  sales. 

I  had  finished  the  above  study  of  true  as  compared  with 
assessed  values  before  receiving  the  "First  Biennial  Report  of  the 
Wisconsin  State  Tax  Commission,"  (Madison,  1901),  second 
edition,  which  I  owe  to  the  courtesy  of  Gov.  La  Follette.  From 
this  report  it  appears  that  in  1873  tne  Wisconsin  legislature  "en- 
acted a  law  (Chapter  210)  providing  that  an  abstract  of  the 
record  of  sales  of  real  estate  in  each  county  be  transmitted  annu- 
ally by  the  registers  of  deeds  to  the  secretary  of  state,  giving 
in  connection  with  the  consideration  named  in  each  deed,  the 
amount  for  which  the  property  was  assessed  as  shown  by  the 
last  assessment  roll.  *  *  *  Wisconsin  is  believed  to  have 
been  the  first  state  to  enact  such  a  law."  The  commission  discov- 
ered that  in  the  25  vears  during  which  the  law  had  been  in  force 
prior  to  their  examination  of  the  statistics  thereby  afforded,  "sales 
of  upwards  of  36,000,000  of  acres  of  land  as  acre  property  had 
been  recorded;  or  that  about  12  per  cent  more  than  the  total 
acreage  of  the  state  had  been  transferred."  Total  acreage  of  the 
state,  including  government  land,  about  34,600,000  acres ;  as- 
sessed for  taxation  in  1898,  as  per  report  of  secretary  of  state, 
32,017,368  acres.  The  commission  found  a  "total  absence  of 
anything  like  uniformity  of  assessment."  Even  "in  the  same 
county  adjoining  towns  or  assessment  districts  differed  widely." 


174  HERTIG    ON    TAXATION. 

When  in  one  town  the  average  assessed  value  averaged,  "say, 
30  per  cent  of  the  actual  selling  value  *  *  *  in  the  adjoin- 
ing town  the  assessment  might  be  on  the  basis  of  50  or  even  75 
per  cent  of  the  selling  value."  There  was,  however,  "some  meas- 
ure of  uniformity  *  *  *  in  individual  towns  or  districts 
through  a  period  of  years."  That  is,  a  rate  once  made  was  gen- 
erally pretty  closely  maintained.  The  higgling  between  assessor 
and  land-owner  fixes  the  assessments ;  and  when  once  fixed,  the 
line  of  least  resistance  runs  closely  along  the  old  figures,  unless 
there  has  been  a  considerable  physical'  change  in  the  property, 
such  as  urban  developments,  mines  opened,  etc.  "Even  where 
assessors  were  frequently  changed,  each  succeeding  assessor,  as 
a  rule,  seemed  to  follow  closely  in  the  footsteps  of  his  predecessor 
in  the  matter  of  fixing  the  valuation." 

To  escape  errors  arising  from  deeds  stating  only  a  nominal 
consideration,  deeds  conveying  only  a  fractional  part  of  a  lot  or 
tract  where  the  assessed  value  of  the  whole  might  have  been  "re- 
corded opposite,"  deeds  conveying  an  undivided  interest  "while 
the  assessments  covered  all  interests,"  and  lastly,  deeds  "drawn 
with  a  higher  or  lower  stated  consideration  than  the  actual  one  for 
which  the  sale  was  made," — the  commission  "instituted  a  scrupu- 
lous examination  in  every  assessment  district  of  each  year's  re- 
ported sales  and  assessments  of  the  same  property."  All  tax  deeds 
were  of  course  eliminated,  all  others  stating  only  a  nominal  con- 
sideration, and  all  others  "where  the  striking  disproportion  be- 
tween the  sale  figures  and  those  of  the  assessment  showed  that  an 
error  of  some  kind  had  been  made."  It  was  believed  that  the 
wide  scope  of  the  data  used  would  largely  eliminate  the  effect  of 
undiscovered  errors.  The  commission,  however,  owing  to  the 
vast  extent  of  the  statistics,  limited  their  examination  and  their 
calculations  to  "the  five  years  from  1895  to  1899,  inclusive,"  dur- 
ing which  time  there  were  sold  7,710,356  acres,  excluding,  of 
course,  the  sales  of  village  and  city  lots.  Now,  in  those  five  years 
the  commission  found  82,519  bona  fide  sales  of  acre  property  and 
40,607  bona  fide  sales  of  city  and  village  lots. 

Passing  over  other  particulars  of  computation  as  detailed  by 
the  commission,  it  is  enough  to  note  here  that  "the  1,300  and  odd 
assessment  districts"  of  the  state  were  taken  separately,  the  ratio 
of  assessed  to  selling  value  year  by  year  determined,  and  then 
with  the  total  assessed  value  in  each  such  district  for  each  year 
before  the  commission,  it  "secured  an  average  ratio  of  .assessed  to 
selling  value  for  each  district"  over  said  period  of  five  years. 
If,  for  instance,  "an  average  ratio  of  assessment  to  selling  price" 
for  any  eiven  year  or  period  is  40  per  cent,  it  is  easy  by  applying 
such  ratio  to  the  total  assessed  value  to  arrive  at  the  true  values, 


HERTIG    ON    TAXATION.  175 

in  so  far  as  the  determined  ratio  may  be  correct.  With  this  pro- 
cess applied  to  each  district  according  to  the  ratio  so  ascertained 
therein,  "the  true  values  of  all  towns,  villages  and  cities  thus 
ascertained  are  added  together,  and  the  aggregates  thus  obtained 
constitute  the  grand  total  of  taxable  real  property  in  the  state."- 
Report,  pp.  45-5 1. 

"The  total  actual  value  of  the  taxable  real  estate  in  the  state, 
based  upon  a  five  years'  average,"  was  thus  found  to 
be  $1,192,867,499.  "The  total  average  assessed  value  of  real  estate 
in  Wisconsin  for  the  corresponding  five  years,  compiled  from  re- 
ports of  the  secretary  of  state,  is  $518,824,553,  and  from  these 
two  sums  we  find  the  average  of  assessed  values  to  be  43.4  per 
cent  of  the  aggregate  actual  value." — Id.  51  The  commission 
note,  however,  that  "nearly  300  million  dollars  of  value,"  in  Mil- 
waukee, "is  assessed  at  between  50  and  60  per  cent  of  actual 
value."  This  would  reduce  the  average  assessed  value  of  the 
other  real  property  in  the  state  to  about  40  per  cent  of  the  true 
value.  The  average  ratio  of  the  assessed  to  the  true  value  of 
lands,  confined  to  acre  or  farm  property  only,  as  "shown  by  the 
computation  based  upon  82,519  sales  of  farm  land,  during  a  period 
of  five  years,"  was  39.5  per  cent.  The  commission,  as  a  further 
means  of  finding  the  assessed  as  compared  with  the  actual  value 
of  farm  property,  sent  out  inquiries  to  a  large  numbe-  of  "selected 
farmers,"  who,  among  other  information,  were  thus  asked  to  give 
"the  value  of  their  real  estate  and  the  amount  for  which  it  was 
assessed  in  1899."  Usable  replies  were  received  from  1,124  farm- 
ers, who  therein  returned  their  land  as  worth  sums  aggregating 
$5,507,036,  "and  the  assessment  of  the  same  property  in  1899  as 
$2,109,927, — the  average  ratio  of  assessment  to  actual  value  ac- 
cording to  those  statements  being  about  38  per  cent." — Id.  57. 

Wisconsin  conditions  do  not  vary  materially  from  those  ex- 
isting in  Iowa,  and  the  elaborate  attempt  of  the  Wisconsin  com- 
mission strikingly  confirms  the  conclusions  to  be  drawn  from  the 
far  scantier  Iowa  figures ;  and  we  may  conclude  that  in  both 
states,  and  for  the  times  in  both  when  the  assessed  was  by  law 
required  to  be  the  true  value,  it  was  in  fact  just  about  40  per  cent 
of  the  same  as  determined  by  actual  sales. 

The  Minnesota  commission  was  not  in  fact  seriously  perplexed 
by  any  lack  of  data  on  the  relation  of  assessed  to  acfual  values. 
It  is  safe  to  say,  that  if  the  commission  had  had  twice  the  time 
and  twice  the  money  to  spend,  it  could  hardly  have  stated  differ- 
ently or  more  judiciously  the  conclusion  found  on  page  16  of  the 
Report :  "One  of  the  potent  causes  for  the  concealment  from  the 
assessor  of  money  and  other  classes  of  highly  valuable  personal 
property  is  the  fact  that  whenever  listed  it  is  commonly  valued 


176  HERTIG    ON    TAXATION. 

by  a  higher  standard  than  that  applied  to  other  classes  of  prop- 
erty." And  the  commissioners'  own  facts  and  figures  on  the  as- 
sessment of  real  estate  (Report,  pp.  11-12)  are  strikingly  inter- 
esting. I  transcribe: 

"Real  property,  always  visible  and  its  valuation  readily  ascer- 
tainable,  is  a  startling  example  of  the  disregard  of  law  by  those 
to  whom  its  administration  is  entrusted.  The  assessed  valuation 
of  such  property  throughout  the  state  for  the  past  twenty  years 
is  instructive.  Selecting  for  illustration  every  tenth  county  as 
they  appear  on  page  190  of  the  report  of  the  auditor  of  state  for 
the  year  1899-1900,  lands  were  assessed  per  acre  in  the  years 
1880,  1892  and  1900,  respectively,  as  follows: 

COUNTY—                                                    1880.  1892.  1900. 

Aitkin   $2.58  $2.10  $1.45 

Carver   11.06  14.10  12.89 

Dodge  !O-79  10.92  13.12 

Houston 8.61  6.57  7.18 

Lake    4.96  3.93  5.03 

Morrison   4.32  4.40  3.34 

Pipestone 3.90  4.93  5.04 

Rock   5.08  7.41  7.82 

Traverse 3.76  4.65  4.95 

Yellow  Medicine   4.65  7.41  6.55 

"Results  still  more  surprising  are  seen  when  we  select  from  the 
lists  certain  of  our  oldest  and  most  prosperous  counties.  We 
present  the  following  instructive  tabulation : 

COUNTY—                                                  1880.  1892.  1900. 

Brown    $6 . 87  $7 . 64  $8 . 07 

Faribault   7.54  9.51  14.25 

Goodhue  I3-9I  I3-I°  11.67 

Nicollet    • 9.15  10.61  10.80 

Olmsted    lZ-7&  12.81  13-45 

Winona IO-75  11.41  12.01 

"It  is  obvious  that  valuations  for  purposes  of  assessment  have 
been  but  slightly  influenced  by  actual  valuations.  Comparing  as- 
sessments generally  made  in  the  year  1900  with  those  made  in 
1880,  1890  and  other  years,  it  is  manifest  that  little,  if  any,  attempt 
has  been  made  to  advance  the  assessed  valuation  in  accordance 
with  the  advance  in  actual  values,  which  have  in  many  instances 
been  very  great. 

"The  injustice  is  still  more  apparent  when  the  assessments  of 
real  property  in  one  county  are  compared  with  those  in  another 
county.  The  same  report  of  the  auditor  of  state  shows  (p.  194) 


HERTIG  ON  TAXATION.  177 

that  in  1880  the  average  valuation  of  acre  property  in  the  state 
was  $7.80,  while  in  1899  it  was  only  $7.02. 

"These  figures  leave  no  room  for  doubt  that  the  constitutional 
mandate  requiring  property  to  be  assessed  at  its  'true  value  in 
money'  has  been  more  honored  in  the  breach  than  in  the  observ- 
ance in  the  assessment  of  real  property." 

The  figures  given  by  the  Commission,  striking  and  interesting 
as  they  are,  do  not  sustain  quite  the  full  conclusion  drawn  from 
and  implied  in  them.  Moreover,  the  Commission,  beginning  with 
the  average  assessed  value  in  1880,  failed  to  note 'the  handsome 
advance  in  assessed  values  that  had  been  made  through  the  decade 
beginning  with  1870,  in  which  they  averaged  $4.39  per  acre  up 
to  1880,  when  they  averaged  $7.80  per  acre.  It  must  be  remem- 
bered, too,  that  1880  was  a  year  of  hope  and  activity  in  Minne- 
sota realty;  that  the  year  1892,  though  afterwards  emphasized 
by  public  speakers  as  the  culmination  of  a  golden  age  of  pros- 
perity, was,  as  regards  Minnesota,  like  the  six  years  preceding  it, 
a  time  of  stagnant  or  falling  real  estate  prices,  and  that  in  1900 
an  era  of  higher  prices  for  lands  had  practically  just  begun,  and 
that  for  acres  the  rule  is  that  assessed  values  do  not  respond 
quickly  either  to  rising  or  to  falling  prices.  I  do  not  think  that 
lands  in  Aitkin  county,  for  instance,  could  have  been  sold  gen- 
erally, or  on  any  large  scale,  for  a  price  equal  to  their  assessed 
value  either  in  1880  or  in  1892.  It  may  be  noted,  in  this  connec- 
tion, that  Judge  H.  R.  Wells,  of  Preston,  Minn.,  in  addressing 
the  tax  committee  of  the  House,  on  February  n,  and  making  a 
drastic  attack  on  the  code  proposed  by  the  Tax  Commission, 
asserted  with  great  positiveness  that  many  lands,  even  rural  lands, 
in  Minnesota  were  not  in  fact  undervalued  in  the  assessors'  books 
either  for  the  years  mentioned  by  the  Tax  Commission  or  for 
other  years ;  and  that  there  are  whole  counties  in  which  the  averT 
age  selling  price  would  not  ordinarily  and  on  an  average  reach 
the  assessed  values  of  the  lands  so  sold.  It  may  be  added,  too, 
that  many  of  the  more  undesirable  and  non-productive  city  prop- 
erties, say  in  St.  Paul,  Minneapolis  and  Duluth,  can  still  be 
bought  at  a  price  not  exceeding,  or  even  less  than,  their  assessed 
values.* 

Many  a  mortgagee,  in  the  decade  ending  in  1897,  nas  winced 
under  the  burden  of  taxation  on  lands  acquired  at  foreclosure 


The  St.  Paul  Pioneer  Press,  in  its  issue  of  February  5,  1902,  made 
editorial  comment  on  what  it  calls  "the  gross  inequalities  in  the  assessed 
valuations  of  real  estate  in  the  several  counties  as  the  result  of  the  efforts 
of  local  assessors  and  boards  aided  by  the  representatives  of  the  different 
local  .districts  in  the  state  board  of  equalization,  to  reduce  their  several 
quotas  of  state  taxation  to  the  lowest  figures  possible.  "The  consequence," 


178  HERTIG    ON     TAXATION. 

sale — lands  mortgaged  to  him  in  the  less  developed  portions  of 
the  state  for  two  dollars  or  less  per  acre,  up  to  three,  four  or  five 
dollars  per  acre,  and  on  which  in  many  cases  he  made  a  loss, 
sometimes  of  a  portion  of  his  principal,  oftener  of  a  portion  only 
of  the  interest  due  and  of  taxes  necessarily  paid  by  him.  This  is 


says  the  Pioneer  Press  further,  "is  that  in  all  the  rural  counties  of  this 
state,  and  in  fact  in  all  the  counties  of  the  state  outside  of  Hennepin,  Ram- 
sey and  St.  Louis,  containing  the  three  leading  cities,  the  assessed  valua- 
tions of  real  estate  are  notoriously  much  less  than  one-third,  and  in  many 
instances  less  than  one-quarter,  of  the  selling  value  of  the  property.  It  is 
equally  nototrious  that  in  the  cities  of  Minneapolis,  St.  Paul  and  Duluth, 
where  the  assessed  valuations  were  based  on  the  extravagantly  inflated 
prices  of  the  boom  times  of  1887,  the  assessed  valuations  of  real  estate  are 
in  general  far  in  excess  of  what  the  property  would  sell  for.  There  have 
been  some  reductions  in  the  real  estate  valuations  of  St.  Paul  and  Min- 
neapolis on  this  account,  but  in  St.  Paul  at  least,  if  the  real  estate  were 
reassessed  at  its  actual  selling  value  it  would  result  in  a  large  reduction 
of  the  present  assessed  valuations.  There  are  tens  ot  thousands  of  city  lots 
in  St.  Paul  whose  owners  would  be  glad  to  sell  them  for  one-half  or  one- 
third  their  assessed  valuation.  This  is  more  or  less  the  case  with  Min- 
neapolis and  Duluth." 

Undoubtedly  some  properties  are  over-assessed  in  the  cities  named ; 
and  the  wholesale  statement  of  the  Pioneer  Press,  while  somewhat  over- 
drawn as  regards  present  conditions,  is  very  nearly  the  literal  truth  if 
applied  to  conditions  prevailing  in  1893-1897  and  even  somewhat  earlier. 
Facts  in  partial  support  of  the  statement  at  present  may,  however,  be 
readily  given.  Thus,  in  April,  1902,  an  , auction  sale 'of  the  undisposed 
portion  of  the  "Dawson  estate"  was  held  in  St.  Paul.  The-  properties 
consisted  of  city  lots,  mostly  unimproved  or  nearly  so,  and  of  acres — all 
lying  in  St.  Paul  and  Ramsey  county.  Here  are  the  figures : 

Aggregate  assessed  values  were  a  little  more  than $400,000 

Aggregate  auction  sale  price   162,653 

Purchasers  got  lands  subject  to  back  taxes  of  about  30,000 

The  sale  had  been  well  advertised  and  attracted  much  local  attention. 
Taxes  are  levied  in  a  wholesale  way,  and  if  the  true  wholesale  value  of  lands 
cannot  be  determined  by  a  fair  and  well  advertised  auction  sale,  piece  by 
piece  of  the  lots  and  acres  making  up  such  aggregate,  then  there  is  no 
way  of  determining  the  true  wholesale  market  value  of  lands.  Yet,  here 
is  a  fair  sale  at  prices  somewhat  less  than  half  the  assessed  valuations. 

I  inquired  a  few  days  after  said  sale  was  made,  of  a  conservative  holder 
of  considerable  St.  Paul  realty,  if  he  had  any  lots  or  pieces  that  he  would 
sell  for  less  than  the  assessed  values.  He  answered :  "I  have  some  lots 
in  St.  Paul  that  I  would  sell  now,  and  would  have  sold  any  time  these  last 
five  or  six  years,  for  the  assessed  values.  I  have  half  a  dozen  pieces  I 
would  sell  for  less  than  the  assessed  values,  say  for  90  per  cent  of  their 
average  assessed  value.  This  is  approximately  true  of  every  St.  Paul 
real  estate  owner  who  has  considerable  holdings.  .  I  have  one  improved 
piece  that  I  would  sell  for  90  per  cent  of  its  assessed  value.  Have  kicked 
on  assessments,  but  can't  get  them  lower." 

No  doubt  over-assessments  of  city  property  are,  and  particularly  have 
been,  more  numerous  and  oppressive  than  over-assessments  in  the  rural 
counties,  though  as  I  have  shown,  cases  of  over-assessment,  or  at  least 
full  assessment,  are  not  wanting  in  the  latter. 


HERTIG    ON     TAXATION.  179 

particularly  true,  to  my  own  knowledge,  of  Crow  Wing  county, 
which  adjoins  Aitkin,  and  which  assesses  lands,  on  an  average, 
at  $2.33  per  acre.  It  levies,  or  did  in  1901,  an  average  tax  for  all 
purposes  aggregating  nearly  4  per  cent  of  such  valuation.  It  is 
an  undeveloped  county ;  the  farms  are  new ;  the  farmers  mostly 
without  capital.  A  farmer  owning  160  acres  of  land,  mortgaged, 
bought  on  purchase-money  contract,  or  held  somehow  in  the  hope 
of  ultimate  clear  title,  soon  makes  improvements  that  bring  his 
taxes  to  $20.00  per  year  and  upwards  on  his  quarter  section.  If, 
as  sometimes  happens,  he  buys  cattle  and  horses  on  mortgage, 
or  whether  he  gets  them  by  slower  and  surer  means,  his  personal 
property  tax  comes  at  once  into  play;  and  he  is  lucky  indeed  if 
he  gets  clear  of  his  various  taxes  for  1-12  of  his  gross  earnings. 

It  may,  in  fine,  be  truly  said  that  in  Minnesota  there  were, 
in  1892,  many  farms,  more  particularly  undeveloped  and  little- 
improved  farms,  which,  if  then  bought  for  a  price  not  equal  to 
their  assessed  value,  and  held  by  the  purchaser  for  speculation 
until  1900,  and  then  sold  for  the  best  obtainable  price,  would  have 
returned  a  loss  instead  of  a  profit  on  the  investment.  It  may  just 
as  truly  be  said  that  the  like  lands  bought  for  the  like  price  in 
1892,  and  held  until  this  year,  1902,  and  sold  now  for  the  best  ob- 
tainable price,  would  return  a  fair  profit  on  the  investment.  Both 
by  general  custom,  and  in  many  states  by  statute  solemnly  con- 
firming such  custom,  the  fair  cash  value  or  "true  value  in  money" 
of  such  land  or  other  property  is  simply  the  ideal  price  it  would 
bring  if  discreetly  sold  at  private  sale  on  a  market  supplied  only 
with  occasional  or  average  offerings  of  the  kind  of  property  so 
valued.  Everybody  know-s  that,  ordinarily  speaking,  no  such 
price  could  be  obtained  for  all  the  lands  in  a  county  if  all  were 
offered  and  sold  in,  a  few  days',  or  even  a  few  weeks',  time ; 
still  less,  if  all  the  lands  in  half  a  dozen  adjoining  counties  were 
at  the  same  time  put  on  the  market  and  sold.  Taking  one  year 
with  another,  it  is  oftener  that  the  ideal  price  mentioned  cannot 
be  obtained  for  an  occasional  tract  of  land  than  that  it  can.  Yet, 
with  all  the  foregoing  facts  and  considerations  adverse  to  the 
true  value  of  lands,  as  compared  with  their  assessed  value,  it  re- 
mains undoubtedly  true  that,  taking  the  average  of  settled  con- 
ditions, and  applying  them  to  the  assessed  value  of  lands  in  slates 
where,  a  uniform  tax  on  such  valuation  is  levied  throughout  the 
state  for  state  purposes,  and  where  the  law  aims  to  assess  at  full 
value,  the  average  actual  selling  price  of  lands  not  sold  under 
the  hammer  or  for  taxes  is,  as  in  Iowa  prior  to  1897,  about  two- 
and  one-half  times  their  assessed  value.  Assessors,  as  in  St. 
Cloud,  Minn.,  not  infrequently  adopt  for  their  own  guidance  the 
rule  that  40  per  cent  of  what  they  think  is  the  fair  selling  price 


180  HERTIG    ON    TAXATION. 

should  be  put  dov/n  as  the  assessed  value.  It  follows,  therefore, 
that,  where  this  rule  applies,  if  the  state  or  the  Civil 
Nation,  should  need  to  obtain  by  condemnation  proceedings  large 
tracts  of  land,  while  the  state  should  not  fail  to  do  equity  where 
special  facts  would  seem  to  require  it. — yet  it  should  have,  as  a 
shield  against  the  stubborn  or  obstructive  proprietor,  the  option 
to  take  the  land  at  ~y2  times  the  amount  of  its  assessed  value  on 
an  average  taken  on  assessments  made  for  several  years  prior  to 
such  proceedings.  But  this  is  another  matter,  of  which  I  "shall 
elsewhere  say  more.  When  there  is  no  state  tax  levied  on  the  as- 
sessed value  of  lands,  but  only  local  taxes,  then,  so  long  as  the 
valuation  is  uniform  within  the  taxing  district,  the  assessed  value 
matters  comparatively  little  to  the  tax-payer,  and  there  is  a  wide 
range  in  the  percentages  of  assessed  compared  with  true  values. 
In  Pennsylvania,  the  state  levies  no  tax  on  lands ;  and  there,  as 
ascertained  by  careful  investigation  in  1892,  "the  ratio  of  assessed 
to  actual  valuation  differs  greatly  in  the  several  counties,  varying 
from  17  per  cent  in  Luzerne  to  100  per  cent  in  Berks,  'Chester  and 
Perry." — Report  of  the  Committee  Appointed  by  the  Tax  Con- 
ference of  Pennsylvania  Interests.  The  ratio  of  assessed  to  actual 
valuation  of  real  estate,  averaged  for  the  entire  state  of  Pennsyl- 
vania, as  ascertained  in  the  same  investigation  for  the  year  1892, 
was  64^  per  cent. 

The  state  of  Indiana  claims  to  hold  an  exceptional  place  in  the 
matter  of  taxation.  A  few  years  ago  it  installed  machinery  to 
"jack  up"  assessed  values.  In  1891  that  state  greatly  increased 
the  powers  of  the  state  board  of  tax  commissioners.  Since  then 
Indiana  has  been  struggling,  with  more  or  less  success — more  in 
the  case  of  real  estate,  less  in  the  case  of  personal  property — to 
attain  for  assessed  value  the  ideal  of  "true  cash  value."  The  state 
board  of  tax  commissioners  has  succeeded  in  making  it  obligatory 
on  the  respective  counties  to  pay  out  of  county  funds-  the  ex- 
penses of  county  assessors  in  attending  annually  at  the  state  cap- 
ital a  general  convention  of  the  state  tax  commissioners  and  the 
assessors.  The  governor,  who  is  by  virtue  of  his  office  the  presi- 
dent of  the  state  board  of  tax  commissioners,  usually  presides  at 
these  conventions.  The  state  auditor,  secretary  of  state  and  two 
special  commissioners,  constituting  the  other  members  of  the 
board,  "are  also  present  and  often  read  papers  and  take  part  in 
the  discussions.  The  attorney  general  is  always  present  to  answer 
the  thousand  and  one  questions  ninety-two  assessors  can  put  in 
a  question  box." — Indianapolis  Correspondence  of  Minneapolis 
Journal,  Feb.  12,  1902.  Such  convention  has  no  legal  authority 
to  fix  valuations.  The  purpose  is  to  secure  uniformity  of  valu- 
ation of  the  same  kinds  of  property  in  all  parts  of  the  state,  to 


HERTIG    ON    TAXATION.  181 

create  enthusiasm  for  the  true  cash  value  ideal,  to  brace  up  the 
assessors,  to  inform  them  of  their  powers  and  of  new  tax  laws. 
The  conference  convention  has  proved  to  be  an  immense  help  in 
the  direction  of  enforcing  the  law.  *  *  *  W.  H.  Hart,  audi- 
tor of  state,  *  *  *  '  is  of  the  opinion  that  Indiana  real  estate 
is  assessed  at  from  60  to  70  per  cent  of  its  true  cash  value.  A 
comparison  of  real  estate  transfers  and  tax  duplicates  proves  that 
Mr.  Hart's  estimate  is  high  enough.  Often  land  is  sold  for  twice 
its  assessed  value." — The  Same.  It  is  apparent,  then,  that  the 
ideal  of  true  cash  value  even  as  regards  real  estate  is  still  far 
ahead  of  attainment ;  and  it  is  certain,  as  I  shall  show  later  and 
on  other  evidence,  that  the  ideal  of  true  cash  value  for  personal 
property  in  Indiana  is  immensely  and  irretrievably  beyond  at- 
tainment. 

Based  on  the  above  and  foregoing  facts,  and  on  other  facts 
which  I  have  observed  and  studied,  are  the  following  general 
propositions,  which,  I  submit,  would  not  be  substantially  changed 
or  modified  by  any  fair-minded  investigator,  however  minute  or 
extended  his  research : 

1.  The  tendency  to  depress  assessed  values  below  the  sum 
for  which  owners  of  real  estate  would  be  willing  to  sell  their  re- 
spective tracts,   is   universal,  and,  except   in  comparatively  rarp 
cases,  results  in  assessed  values  being  fixed  at  less  than  half  the 
average  private   selling  price   as   determined    by    actual    sales. 
Where  there  is  a  special  effort  made  through  special  tax  machin- 
ery, as  in  Indiana,  to  bring  assessed  values  and  selling  prices  to- 
gether ;  or  where,  as  in  Pennsylvania,  real-estate  values  through- 
out the  state  are  not  "equalized,"  and  no  state,  but  only  local, 
tax  is  levied, — the  average  ratio  of  assessed  value  to  private  sell- 
ing prices  (assumed  to  be  "true  cash  value"),  is  from  15  to  25 
per  cent  higher  than  the  average  level. 

2.  Another  cause  that  makes  assessed  values  in  certain  locali- 
ties greater  than  they  would  otherwise  be  is  the  real  or  fancied 
local  needs  in  new  and  undeveloped  countries ;  when  the  rate  of 
the  tax  levy  on  lower  valuations  would  be  too  high  to  look  well, 
local  boards  naturally  assess  values  higher  than  they  otherwise 
would.     A  like  cause  of  higher  assessed  values  exists  where  the 
rate  of  taxation  is  limited  by  the  state  constitution,  and  the  needed 
or  desired  revenues  cannot  be  had  without  marking  up  values. 
These  two  causes  may  be  safely  neglected  in  a  work  like  that 
undertaken  by  the  Minnesota  Tax  Commission. 

3.  The  many  individual  and  local  cases  where  on  the  one 
hand  the  owner  beats  the  public  by  getting  his  land  assessed  at 
°n  extremely  low  value,  and  where,  on  the  other  hand,  the  public 
beats  the  owner  (as  in  St.  Paul,  Minneapolis,  Duluth  and  else- 


182  HERTIG    ON    TAXATION. 

where),  by  assessing-  his  lands  and  lots  too  high  as  compared  with 
down-town  blocks  and  buildings,  and  as  high,  or  even  higher 
than  they  can  be  sold,: — these  many  individual  and  local  cases 
prove  that  the  justice  meted  out  by  the  "rule  of  thumb,"  as 
worked  by  assessors  and  equalizing  boards,  only  roughly  approxi- 
mates ideal  justice ;  prove  also  that  the  like  inequalities  are  not  to 
be  overcome  entirely  under  any  system  of  taxation  ;  accent  collater- 
ally the  important  fact  that  it  seldom  or  never  pays  to  own  poor 
property.  In  this  latter  connection  it  may  be  observed  that  the 
owner  of  a  poor  farm,  of  an  undesirable  lot,  of  a  buildmg  ill- 
adapted  to  its  purpose,  is  generally  assessed  relatively  higher 
than  his  richer,  or  luckier,  neighbor.  The  average  assessor,  or 
average  other  man,  is  always  timid  in  dealing  with  what  sur- 
passes the  ordinary  in  his  line.  Administrative  features  that  will 
obviate,  as  far  as  practicable,  the  inequalities  mentioned  in  this 
paragraph,  are  not  difficult  to  devise  for  any  tax  code.  Such 
features  in  broad  outline  would  always  consist  in  provision  for  a 
board  of  review  having  the  time  and  the  capacity  to  do  effective 
work  in  correcting  assessments. 

4.  It  is  true,  and  especially  important  to  bear  in  mind,  that 
the  difficulties  and  perplexities  which  may  occur  to  the  legislator 
in  giving  practical  effect  to  the  three  preceding  numbered  para- 
graphs-, stand  upon  their  own  bottom,  so  to  speak,  and  that  his 
right  or  utfoiig  solution  of  them  need  not  affect  substantially  the 
kind  and  quality  of  the  legislation  which  he  should  favor  in  tax- 
ing railroad  and  other  large  corporations  and\  public  service  com- 
panies. 

5.  The  complex  and  often  ridiculous  features  in  codes  de- 
signed to  work  out  the  assessment,  levy  and  collection  of  a  gen- 
eral property  tax,  as  shown  up  in  my  next  chapter  with  the  Min- 
nesota commission's  proposed  code   taken   for  monumental   and 
warning  example, — do  not  make  for  the  single  taxer's  theory,  and 
do  not  bar  a  sound  system  of  taxation  which  shall  reasonably  levy 
and  collect  taxes  on  nearly  all  kinds  and  sub-kinds  of  "property." 


CHAPTER  XIV. 


Prevalence  of  personal  property  tax  in  the  United  States— Constitutions 
prescribe,  practice  demurs — General  property  tax  basis  of  public  finance 
in  the  several  states — Minnesota's  tax  commission,  under  the  yoke  of 
her  constitution,  declined  to  pad  the  yoke;  but  would  gladly  see  it 
made  more  flexible — Doctors  doubting  their  drastic  prescription — Per- 
sonal property  features  of  their  proposed  code  examined  and  criticised. 


The  facts  pertaining  to  personal  property  taxes  in  the  United 
States  are  notorious  and,  in  broad  outline,  extremely  simple.  Sec- 
tion two  of  article  XII  of  Ohio's  constitution,  adopted  in  1851, 
and  still  in  force  there,  is  fairly  representative  of  the  spirit  of 
A.merican  constitutions  and  statutes,  whose  makers  have  aimed — 
aim  excellent  in  its  intent,  extremely  defective  in  its  marksman- 
ship! — to  apportion  justly  the  burdens  of  taxation  on  all  property 
according-  to  its  value  in  money.  The  first  and  most  important 
clause  in  said  section  of  the  Ohio  constitution  is  as  follows: 
"Laws  shall  be  passed  taxing  by  a  uniform  rule  all  moneys,  cred- 
its, investments  in  bonds,  stocks,  joint  stock  companies,  or  other- 
wise, and  also  all  real  and  personal  property,  according  to  its  true 
value  in  money."  The  framers  of  Minnesota's  constitution  copied 
word  for  word  (Sec.  3,  Art.  IX)  the  Ohio  clause  just  quoted, 
with  the  exception  of  omitting  after  "taxing,"  the  words  "by  a 
uniform  rule."  But  as  the  Minnesota  framers  had  used  the  word 
"uniform"  in  the  first  section  of  article  IX,  they  doubtless  thought 
that  whatever  force  and  effect  the  words  "by  a  uniform  rule" 
might  have,  they  had  sufficiently  embodied  in  said  section  i,  the 
first  clause  of  which  runs  as  follows :  "All  taxes  to  be  raised  in 
this  state  shall  be  as  nearly  equal  as  may  be,  and  all  property  on 
which  taxes  are  to  be  levied  shall  have  a  cash  valuation  and  be 
equalized  and  uniform  throughout  the  state." 

In  Minnesota,  then,  as  in  nearly  all  of  the  American  states, 
the  taxing  power  is  committed  to  the  legislature  under  the  rigid 
constitutional  restriction  that  there  must  be  no  discrimination  be- 
tween the  taxing  of  realty  and  the  taxing  of  personal  property ; 
that  each  must  be  assessed  at  its  "true  value  in  money" ;  and  that 
the  rate,  or  percentage,  of  taxes  levied  on  the  valuation  of  real 


184  HERTIG    ON     TAXATION. 

estate  in  any  year  must  be  uniform  with  the  rate  on  personal  prop- 
erty as  valued  for  the  same  year;  or,  in  simple  language,  when 
a  lot  assessed  at  $100.00  costs  its  owner,  in  any  year,  a  tax  of 
$3.00,  a  horse  of  his  assessed  at  $100.00  must  also  cost  him  a  tax 
of  $3.00  in  the  same  year;  or,  if  lot  and  horse  have  different  own- 
ers, each  owner  pays  the  same  tax  on  each, — the  law  meaning  and 
intending  that  the  assessed  value  of  the  lot  and  of  the  horse  shall 
truly  declare  the  "true  value  in  money"  of  each.  But  the  con- 
stitution makes  it  obligatory  on  the  legislature  to  pass  laws  tax- 
ing all  moneys  and  all  credits.  Now  if  the  owner 
of  the  lot  or  of  the  horse  sells  that  particular  prop- 
erty on  time,  on  credit,  on  "tick"  or  in  any  form  of 
words  meaning  that  the  purchaser  does  not  pay  spot 
cash  for  his  purchase,  but  that  he  creates  a  debt  by  the  deal  which 
he  is  bound  to  pay  later, — then,  in  every  such  case,  whether  the 
sale  is  on  open  account,  or  the  amount  to  be  paid  is  evidenced  by 
a  promissory  note  signed  by  the  purchaser,  the  seller  owns  a 
"credit"  on  which  the  law  requires  him  to  pay  taxes,  and  the  pur- 
chaser owns  a  lot  or  a  horse  on  which  the  law  equally  requires 
him  to  pay  taxes.  The  same  lot,  or  horse,  or  any  other  piece  of 
realty  or  of  personal  property  may  be  sold  an  indefinite  number  of 
times  and  create  the  like  number  of  outstanding  or  technical 
"credits"  from  one  assessment  day  to  the  other.'  The  owner  of 
the  horse  on  asssessement  day  must  pay  the  current  rate  of  taxa- 
tion on  its  "true  value  in  money,"  while  a  dozen  or  any  other  num- 
ber of  men  who  may  hold  "credits"  as  the  result  of  the  successive 
sales  of  that  same  horse  must  each  pay  the  like  rate  of  taxation 
on  his  credit  assessed  at  its  "true  value  in  money."  But  if  it  is 
a  board-of -equalization  horse,  meaning  thereby  a  horse,  as  horses 
are  tagged  in  value  by  the  state  board  of  equalization  in  Minne- 
sota, then  the  owner  of  the  horse  on  assessment  day  will  have  to 
pay  the  current  rate  of  taxation  only  on  "$26.00  to  $30.00,"  for 
that  is  the  range  of  taxable  value  of  the  horse  as  fixed  by  said 
state  board ;  whereas  if  a  horse  has  been  sold  a  dozen  or  any  other 
number  of  times,  let  us  suppose,  for  $100.00  or  more  each  time, 
each  "solvent  credit"  thereby  created  will,  if  listed  for  taxation 
at  all,  be  assessed  at  or  near  its  face  value.  Thus  the  assessment- 
day  horse-owner  is  hit  lightly,  while  the  faith  in  prior  owners — 
"faith,"  says  St.  Paul,  "is  the  substance  of  things  hoped  for"- 
which  gave  rise  to  these  successive  credits,  and  remains  always 
the  ground  of  whatever  estimated  value  they  are  reckoned  to  pos- 
sess, is  marked  for  the  assessor's  heaviest  blows,  unless  indeed 
the  conclusion  of  Paul's  definition,  "the  evidence  of  things  not 
seen,"  suggests  to  each  credit-owner  that  in  his  own  case,  at  least, 
"the  evidence  of  things  not  seen"  can  readily  become,  for  the  as 


HERTIG     ON     TAXATION.  185 

sessor,  the  unseen  evidence  of  things  unknown  and  unlisted.  The 
assessment-day  horse-owner  joins  the  universal  trust  to  keep  the 
assessed  value  of  visible  tangible  property  as  low  as  possible ; 
and  the  credit-owner  joins  the  more  special  and  limited  trust  to 
keep  moneys  and  credits  as  much  out  of  sight  as  possible.  Each 
apprehends  more  or  less  clearly  the  contradictions  and  absurdities 
in  the  taxing  system.  One  feels  he  is  justified  in  a  low  valuation 
of  tangible  property  because  his  neighbor,  or  perhaps  the  nearest 
Village  Hog,  is  covering  certain  notes  and  mortgages  clean  up : 
the  neighbor  or  the  Hog  covers  up  partly  because  he  can,  and 
partly  because  if  he  does  not,  he  will  be  hit  harder,  much  harder 
than  the  tax-payer  whose  holdings  are  mostly  in  visible  tangible 
properties.  It  is  hardly  necessary  to  add  that  the  uniformity  of 
rate  in  this  paragraph  meant  holds  good  only  for  limited  areas. 
Each  taxing  district  may,  and  generally  does,  have  a  different 
rate. 

Now  the  Minnesota  Tax  Commission  confronted  by  the  s'ate 
constitution  and  what  it  imposes — the  general  property  tax,* 
which  "is  the  keystone  of  the  financial  arch  of  the  states" — could 
hardly  do  otherwise  in  submitting  a  new  tax  code  than  attempt 
to  make  its  features  such  as  give  wider  and  more  literal  effect  to 
the  constitution.  "The  mandate  of  the  constitution,''  says  the  com- 
mission, "is  clear  and  explicit  in  requiring  the  application  of  that 
rule  [requiring  all  property  to  be  taxed  according  to  its  "true 
value  in  money"}  and  no  other.  Ind£ed,  any  statute  enacted  by 
the  legislature  which. prescribed  a  different  rule  would  be  clearly 
invalid,  and  the  action  of  any  officer  in  departing  from  that  rule 
in  the  assessment  of  property  would  be  a  gross  violation  of  the 
constitution." — Report,  p.  17.  I  said  the  commission  "could 
hardly  do  otherwise" ;  but  it  would  be  better  to  put  it,  could 
hardly  be  expected  to  do  otherwise.  It  would,  however,  have 
shown  a  more  subtle  and  more  practical  grasp  of  the  situation,  if 
the  commission  had  taken  the  ground  that  the  constitution  has  be- 
come what  the  people  in  carrying  it  into  effect  have  made  it,  as 
well  in  the  relation  of  assessed  to  true  values  as  in  other  things. 
The  letter  of  the  law  is  one  thing ;  the  practical  construction  given 
to  it  may  be  an  entirely  different  thing;  and  when  that  practical 
construction  is  one  which  the  people  have  placed  on  a  written  con- 
stitution whose  letter  still  abides  unchanged,  we  may  be  sure  that 
such  construction  will  continue.  The  constitution  of  the  United 
States,  for  instance,  contemplates  according  to  its  letter  and  the 
intention  of  its  framers  the  election  of  a  president  by  an  un- 


*The   general   property  tax   is   so  called   from   the  idea   underlying  it, 
that  everything  which  is  called  "property"  should  be  taxed. 


186  HERTIG     ON     TAXATION. 

pledged  body  of  electors  chosen  for  their  discretion  and  prudence 
to  elect  a  president  in  the  free  exercise  of  that  discretion  and  pru- 
dence ;  the  people  have  construed  that  instrument  in  such  a  way 
that  the  president  is  practically,  though  not  literally, 
elected  by  the  people,  or  rather  by  the  popular  will  as 
expressed  through  the  several  states  in  the  technical  number  of 
electoral  votes  allotted  to  each.  A  presidential  elector  who  would 
venture  to  vote  against  the  candidate  he  was  chosen  to  vote  for 
would  commit  politically  the  unpardonable  sin,  be  execrated  and 
perhaps  killed  by  his  enraged  constituents.  Had  the  commission 
taken  the  more  subtle  and  practical  view,  it  could  have  codified 
the  laws  pertaining  to  the  taxation  of  personal  property  strictly 
along  the  old  lines,  adding  such  features  as  would  seem  to  make 
the  tax  laws  more  effective  to  reach  large  corporations  and  the 
like,  its  code  for  taxing  personal  property  might  have  run  suc- 
cessfully the  gauntlet  of  the  legislature,  and  become  a  law.  It  is, 
however,  no  matter  either  for  regret  or  censure  that  the  com- 
mission took  the  more  open  and  palpable  course,  went  to  Indiana 
law  to  compile  a  drastic  code,  and  thereby  gave  to  the  people  a 
foundation  on  which  to  base  a  more  stirring  and  strenuous  cam- 
paign of  education. 

The  commission  did  not  blink  the  evils  nor  the  general  ineffi- 
ciency of  the  personal  property  tax,  and  made  pertinent  observa- 
tions thereupon  :  "So  universally  is  the  evasion  of  the  law  in  the 
assessment  of  personal  property  practiced,  and  so  notorious  is  the 
fact  that  much  the  greater  volume  of  it  is  unassessed,  that  its 
evasion  is  often  regarded  a  virtue  rather  than  a  vice.  In  few, 
if  any,  states  is  more  than  twenty-five  per  centum  of  the  personal 
propertv  liable  to  taxation  listed  for  assessment.  *  *  * 

"It  has  unquestionably  given  rise  to  widespread  immorality. 
Men  of  unquestioned  business  integrity  not  only  find  little  diffi- 
culty in  listing  their  property  far  below  its  real  value,  but  also 
in  making  oath  to  lists  which  they  know  to  be  false.  *  *  * 

"It  has  long  been  the  policy  of  this  state,  as  well  as  of  many 
other  states  to  tax  mortgages  and  other  forms  of  credit.  •  Lon<^ 
experience  has  demonstrated  that  such  a  law  can. at  best  be  but 
imperfectly  enforced.  Students  of  taxation,  with  scarcelv  an 
exception  denounce  it  as  fallacious  in  principle  and  a  fruitful 
source  of  immorality.  The  taxation  of  a  mortgage,  when  the 
subject  is  itself  tax^d,  is  a  species  of  double  taxation.  *  *  * 

"Low  rates  of  interest  on  mort^a^e  loans  can  never  exist 
where  the  loan  itself  is  taxed.  The  state  which  seeks  to  tax  the 
mortgage  must  expect  one  of  two  results  to  follow  :  (T)  increased 
rates  of  interest  or  (2)  evasion.  Moreover,  the  enforcement  of 
such  a  law  results  in  discrimination  against  the  citizens  of  the 


HERTIG    ON    TAXATION.  187 

state  in  which  it  is  enforced.  The  commission  visited  cities  in 
this  state  where  the  aggregate  rate  of  taxation  was  five  per  cent. 
It  would  be  clearly  impossible  for  a  borrower  to  secure  a  loan 
on  property  in  such  a  town  at  six  per  cent  if  the  lender  was  re- 
quired to  pay  upon  the  loan  a  tax  of  five  per  cent.  The  fact  that 
mortgage  loans  are  being  made  on  property  so  situated  is  a  dem- 
onstration that  the  law  is  as  to  them  inoperative. 

"When  a  state  begins  to  tax  credits  there  is  no  logical  halt- 
ing place  until  all  forms  of  credit  are  reached.  If  the  loan  se- 
cured by  mortgage  is  taxed  so  must  be  the  one  which  is  not  se- 
cured. If  the  loan  evidenced  by  a  written  promise  is  to  be,  so 
must  be  the  one  resting  only  on  a  verbal  promise.  As  no  system 
of  taxation  could  ever  become  efficient  enough  to  reach  the  greater 
volume  of  credits,  it  is  clear  that  its  attempted  enforcement  must 
always  be  attended -with  great  injustice. 

"The  commission  is,  after  careful  consideration,  firmly  of  the 
opinion  that  the  early  abandonment  of  the -present  policy  of  tax- 
ing credits  would  be  wise,  as  the  revenue  derived  therefrom  is, 
and  will  remain,  too  inconsiderable  to  counter-balance  the  in- 
justice and  immorality  incident  to  such  measures.  If  it  be  found 
that  public  sentiment  will  not  at  present  sustain  so  radical  a  change 
in  the  revenue  policy  of  this  state,  then  some  method  for  the  taxa- 
tion of  credits,  less  unjust  than  the  one  now  existing,  should  be 
adopted.  *  *  * 

"While  of  the  opinion  that  it  is  unwise  for  this  state  to  con- 
tinue the  policy  of  taxing  mortgages  and  similar  species  of  prop- 
erty, the  commission  was,  in  viciv  of  our  constitution,  unable  to 
provide  for  their  exemption,  either  in  whole  or  in  part.  [Italics 
mine.] 

"No  marked  reform  in  the  taxation  of  personal  property  can 
be  effected  until  the  legislature  is  afforded  greater  freedom  of 
action  in  the  matter  of  legislating  upon  the  subject. 

"To  the  objection  that  by  the  exemption  of  credits  many  of 
our  wealthiest  citizens  and  money  lenders  would  escape  taxation, 
we  reply  that  such  a  result  would  not  necessarily  follow.  Every 
system  of  taxation  is  deficient  which  does  not  provide  for  a  rea- 
sonable income  tax.  Minnesota  would  take  a  proud  step  for- 
ward by  wholly  abrogating  a  tax  on  credits,  and  adopting  a  pro- 
gressive income  tax." — Report,  pp.  6,  7,  8,  9. 

The  commission  devotes  chapter  XII  of  the  preliminary  por- 
tion of  its  report  (pp.  46,  47,  48,  49)  to  the  favorable  considera- 
tion of  a  tax  on  incomes, — a  subject  to  which  I  shall  return  in 
subsequent  chapters  of  this  work. 

Between  the  mandates  of  the  state  constitution  and  its  own 
views  that  no  satisfactory  system  of  taxation  can  be  put  into 


188  HERTTG     ON     TAXATION. 

operation  until  that  constitution  shall  have  been  materially 
amended,  the  commission  might  have  likened  itself  to  a  man  with 
a  wooden  leg  entering  himself  for  a  foot  race — so  glaring  is  tne 
contradiction  between  the  commission's  task  and  the  conditions 
thereof.  Sections  I  to  175  inclusive  of  its  proposed  tax  code  were 
unconditionally  rejected  by  the  legislature.  Embraced  in  these 
rejected  sections  are  numerous  drastic  provisions  for  jacking  up 
the  assessed  values  of  property,  and  for  reaching  with  new  and 
improved  assessor's  dragnet  the  alleged  huge  volume  of  perspnal 
property  which  has  hitherto  escaped  its  toils — a  new  and  im- 
proved dragnet  in  whose  efficiency  the  commission  could  have 
had  only  the  most  lukewarm  faith,  since  it  says  on  page  6  of  its 
report:  "In  few,  if  any,  states  is  more  than  twenty-five  per 
centum  of  the  personal  property  liable  to  taxation  listed  for  as- 
sessment." Now  as  this  seems  to  be  true  of  the  state  of  Indiana 
from  whose  code  the  commission  got  most  of  its  proposed  drastic 
provisions — at  least  the  assessed  value  of  Indiana's  personal  prop- 
erty has  about  the  same  ratio  to  the  assessed  value  of  her  realty 
as  is  found  in  some  states  making  no  special  pretense  or  effort 
in  that  line, — the  conclusion  that  the  commission  must  have  had 
but  luke-warm  faith  in  its  own  drasticity  is  irresistible. 

These  drastic  provisions,  rejected,  as  aforesaid,  by  the  Minne- 
sota legislature,  are  interesting  to  students  of  taxation  and  to 
tax-payers  in  all  states  and  in  all  countries,  because  they  consti- 
tute an  admission  by  the  friends  of  a  general  property  tax  that, 
if  such  tax  is  to  be  played  henceforth  effectively  by  Minnesota 
or  any  state  on  the  basis  of  reaching  and  assessing  at  the  "true 
value  in  money,"  these  same  drastic  provisions  are  to  be  its 
trumps  and  its  only  trumps.  Now  what  in  brief,  and  in  a  length 
which  their  great  number  imposes,  are  they? 

They  consist  first  and  foremost  in  a  searching  "dictionary" 
section,  describing  and  defining  in  thirty-six  lines  the  kinds  and 
qualities  of  personal  property  to  be  so  assessed  and  taxed.  Such 
dictionary  section,  however,  is  common  to  the  drastic  as  well  as 
to  the  non-drastic  codes,  beinq"  the  indispensable  basis  from  which 
both  start.  Friends  of  the  .eeneral  personal  property  tax  may, 
and  doubtless  do,  look  upon  the  slightly  varying  dictionary  fea- 
tures of  different  codes  much  as  the  made-to-order  Kentuckian  is 
said  to  look  on  whiskey — finding  none  bad,  only  some  kinds  a  little 
better  than  other  kinds  !  There  are  every  where  so  many  volumes 
of  statutes  in  which  the  reader  can  see  for  himself  a  sample  of 
such  dictionary  work,  that  I  need  not  set  out  here  any  specimen 
in  full.  One  pleasant  feature  of  the  commission's  dictionary, 
brought  into  salient  relief  by  Senator  George  P.  Wilson's  ques- 
tions before  committee  to  one  of  the  tax  commissioners  is  its 


HERTIG    ON     TAXATION.  189 

defining  as  taxable  "all  shares  in  corporations  organized  under 
the  laws  of  this  state,  when  the  property  of  such  corporation  is 
not  exempt,  or  is  not  taxable  to  the  corporation"  and  its  defining 
as  taxable,  on  a  far  more  wide-open  plan,  "all  shades  in  foreign 
corporations,  except  national  banks  owned  by  citizens  of  this 
state" ;  whereby  if  a  group  of  citizens  in  Minnesota  wishing,  say, 
to  own  an  interest  in  lands  by  means  of  corporation  shares  were 
to  organize  a  corporation  and  invest  the  capital  thereof  in  Min- 
nesota lands,  their  stock,  as  such,  would  not  be  taxed  because  the 
property  of  the  corporation  (lands)  is  "taxable  to  the  corpora- 
tion,"— whereas  if  the  same  group  should  invest  the  corporate 
capital  in  Wisconsin  lands,  and  own  in  Minnesota  their  certifi- 
cates of  stock,  they  would  be  taxed  on  these  shares  assessed  at 
their  "true  value  in  money !"  Other  double  taxation  was  pro- 
vided for  by  making  taxable  in  Minnesota  "all  goods,  chattels 
and  effects,  belonging  to  inhabitants  of  this  state,  situate  without 
this  state."  We  know  that  if  an  "inhabitant  of  this  state"  owns 
cows  on  a  Wisconsin  farm,  the  local  assessor  there  will  not  miss 
them; — the  keen  sense  of  justice  of  the  tax  commission  was  not 
keener  than  its  confidence  that  it  could  empower  a  Minnesota  as- 
sessor to  hit  the  same  cows  at  long  range.  But  in  such  sense  of 
justice  and  such  confidence  the  tax  commissioners  were  not  the 
first :  wise  and  virtuous  Massachusetts,  to  mention  no  others,  had 
set  the  pace  for  them.  The  constitution  thrust  into  the  commis- 
sioners' unwilling  hand  an  uplifted  sword  against  commerce  in 
the  shape  of  clause  numbered  five  of  their  property  dictionary, 
taxing  "All  ships,  boats  and  vessels,  and  their  appurtenances,  be- 
longing to  inhabitants  of  this  state,  whether  at  home  or  abroad' 
and  all  capital  invested  therein."  Clause  numbered  twelve  of  the 
same  section  exemplifies  also  the  inherent  defects  of  the  gen- 
eral property  tax,  when  it  would  reach  "All  produce,  seeds  and 
grain  on  hand  within  this  state  whether  in  granary,  mill,  ware- 
house, or  otherwise,  or  in  transit."  As  I  shall  show  in  another 
chapter,  any  tax  that  is  not  a  confiscation  tax  adjusts  itself  so 
that  it  finally  takes  only  a  fair  percentage  of  income.  Real  es- 
tate taxes,  in  so  far  as  they  do  not  confiscate,  take  only  such  fair 
percentage.  Therefore  to  tax  separately  and  indiscriminately 
"produce,  seeds  and  grain,"  the  income  of  land  which  has  already 
paid  in  the  name  of  real  estate  taxes  its  fair  income  tax,  is  really  a 
kind  of  double  taxation  and  should  be  omitted  entirely,  or  very 
much  restricted.  How  unscientific  the  general  property  tax  can 
become  is  well  illustrated  in  clause  numbered  thirteen  of  the  dic- 
tionary, defining  as  property  "for  the  purposes  of  taxation,"  "all 
mains,  pipes,  conduits  or  subways  laid  in  any  road,  street  or  al- 
ley ;  all  tracks,  roads  and  bridges  of  every  street  railway  company, 


190  HERTIG    ON     TAXATION. 

together  with  all  its  poles  erected  and  wires  laid  or  suspended  in, 
upon  or  over  the  same ;  all  poles  and  wires  laid  or  suspended  in. 
upon,  or  on  any  road,  street  or  alley  by  any  other  company  or 
person."  These  things  taken  by  themselves  and  valued  as  "prop- 
erty" are  nothing  but  "scrap,"  either  worthless  or  having  a  "true 
cash  value"  equal  to  a  very  small  fraction  of  their  first  cost ;  or, 
not  taken  by  themselves  and  valued  as  "property,"  but  valued 
in  relation  to  their  actual  commercial  uses,  they  have  a  value 
little  differing  from  that  of  "scrap"  in  the  case  of  a  still  going  but 
very  unprofitable  company,  a  moderately  increased  value 
over  "scrap"  in  the  case  of  a  struggling  but  doubtlul 
company,  and  finally  a  value  much  above  their  original  cost 
if  owned  by  a  going  and  profitable  concern  which  would  lose 
immensely  by  even  a  temporary  deprivation  of  their  use,  and 
which  may  have  installed  them  at  a  time  when  labor  and  material 
were  much  cheaper  than  on  some  given  assessment  day. 

In  law  the  expression  of  a  number  of  things,  mentioning  each 
by  its  name,  is  often  held  to  mean  that  the  law  purposely  excludes 
from  its  operation  those  things  which  it  fails  to  name,  notwith- 
standing its  use  of  general  language  which  might  have  been 
broad  enough  to  cover  everything,  if  it  had  called  nothing  by  its 
particular  name.  As  concisely  put,  this  rule  is  that  "The  ex- 
pression of  one  thing  is  the  exclusion  of  any  other  [unnamed] 
thing."  The  commission,  like  others  before  them,  bore  this  rule 
in  mind  and  fenced  against  it  in  the  I4th  and  final  clause  of 
their  dictionary  of  personal  property,  by  bringing  under  the  tax- 
yoke  "all  personal  property  not  herein  enumerated  and  not  ex- 
pressly exempt  by  law." 

The  commission,  recognizing  the  supreme  importance  of  mon- 
ey, devoted  to  its  definition  the  whole  of  section  5  of  their  pro- 
posed code:  "The  term  'money,'  or  'moneys,'  whenever  used  in 
this  act,  shall  be  held  to  mean  gold  and  silver  coin,  treasury  notes, 
bank  notes,  and  every  deposit  which  any  person  owning  the 
same  or  holding  in  trust,  and  residing  in  this  state,  is  entitled  to 
withdraw  in  money  on  demand." 

The  quoted  definition  of  "money"  includes  under  the  name 
of  "deposit"  a  very  important  class  of  what  are  in  fact  "credits ;" 
hence  in  defining  the  latter,  to  which  it  devotes  the  whole  of  sec- 
tion 6,  the  commission  was  careful  to  attempt  to  exclude  bank 
deposits,  though,  as  a  matter  of  fact  and  of  practice,  "time  cer- 
tificates of  deposit"  have  that  doubtful  cast  which  makes  it  un- 
certain whether  under  the  commission's  definition  such  certificates 
are  "moneys"  or  "credits."  Section  6,  defining  the  latter,  is  as 
follows :  "The  term  'credits,'  whenever  used  in  this  act,  shall  be 
held  to  mean  and  include  every  claim  and  demand  for  monev  or 


HERTIG  ON  TAXATION.  191 

other  valuable  thing,  and  every  annuity  or  sum  of  money  receiv- 
able at  stated  periods  due  or  to  become  due,  and  all  claims  and 
demands  secured  by  deed,  contract,  or  mortgage  due,  or  to  be- 
come due." 

In  section  n  the  commission  gives  to  the  terms  "value,"  "cash 
value,"  "valuation,"  "true  and  full  value,"  etc.,  the  same  meaning 
"wherever  used  in  this  act,"  and  defines  that  meaning  to  be  "the 
usual  selling  price  at  the  place  where  the  property  to  which  the 
term  is  applied  shall  be  at  the  time  of  assessment,  being  the  price 
which  could  be  obtained  therefor  at  private  sale,  and  not  at  forced 
or  auction  sale."  And  in  section  17,  the  commission  gives  its 
construction  of  the  mandate  in  Sec.  3  of  Art.  IX.  of  the  Consti- 
tution, "Laws  shall  be  passed  taxing  *  *  all  real  and  per- 
sonal property,  according  to  its  true  value  in  money,"  by  the  per- 
emptory prescription,  "All  property  shall  be  assessed  at  its  true 
and  full  value  in  money." 

The  commission  followed  the  usual,  and  indeed,  if  the  taxation 
of  personal  property  is  to  continue,  the  necessary  course,  in  pro- 
viding (Sec.  29)  for  the  annual  listing  and  assessing  of  the  same. 
As  is  well  known,  the  laws  of  the  states  vary  considerably  as  to 
the  frequency  of  assessing  real  estate — a  two-year  interval  be- 
tween real-estate  assessments  being  the  shortest. 

The  startling  awkwardness,  to  use  no  stronger  term,  which 
lurks  in  every  code  providing  for  laying  a  general  property  tax 
appears  full-bodied  in  paragraph  numbered  17  of  the  commis- 
sion's section  31  :  "All  grain  in  any  elevator  belonging  to  the 
person  owning  such  elevator,  or  to  a  person  not  residing  in  this 
state,  shall  be  assessed  against  the  owner  in*  the  assessment  dis- 
trict where  such  elevator  is  situated."  This  implies,  of  course, 
that  grain  in  elevators,  which  grain  is  owned  by  residents  of  the 
state  other  than  the  owners  of  such  elevators,  shall  be  assessed 
to  said  resident  grain-owners  in  the  assessment  district  where 
they  reside.  But,  ordinarily  speaking,  the  owners  of  such  grain, 
the  title  to  which  is  always  evidenced  by  warehouse  receipts,  al- 
most as  transferable  and  as  current  as  money,  will  not  list  the 
same  for  assessment,  and  the  elevator-owner  cannot,  except  on 
the  theory  that  they  to  whom  he  has  issued  his  outstanding  ware- 
house receipts  continue  up  to  assessment  day  to  own  the  grain 
therein  described.  Not  even  on  such  theory  can  the  elevator- 
owner  ordinarily  list  as  belonging  to  any  particular  person  the 
pram  he  happens  to  have  on  hand  at  assessment  day,  and  which 
he  took  in  upon  warehouse  receipts  ;  for,  in  ordinary  course,  he 
maintains  only  grades  of  grain,  and  not  individual  ownership 
of  any  portion  thereof.  He  may,  and  often  does,  treat  it  all  as  his 
own  property,  subject  to  his  liability  to  deliver  grain  of  the  grade 


192  HERTIG    ON    TAXATION. 

and  quantity  called  for  in  his  warehouse  receipts.  The  like  start- 
ling awkwardness  appears  in  lustier  limb  and  limp  in  Chapter  V. 
of  the  Laws  of  North  Dakota  for  1899,  providing  that  grain  in  any 
warehouse  or  elevator  shall  be  taxable  to  the  warehouse  man  or  ele- 
vator man,  irrespective  of  actual  .ownership,  but  giving  him  a  lien 
on  the  gfain  fof  the  amount  of  such  tax!  This  saving  clause, 
of  course,  is  pure  nonsense  :  no  elevator-owner  will  consent  to 
hamper  his  business  by  inserting  in  a  warehouse  receipt  issued 
by  him  that  unless  the  grain  therein  described  shall  have  been 
called  for  and  delivered  before  assessment  day,  he  will  retain 
two,  or  four,  or  five  per  cent  of  it,  as  the  case  may  be,  to  recoup 
himself  for  the  taxes  that  may  be.  levied  on  it  ;  and  no  elevator- 
owner  with  a  care  for  the  permanence  of  his  business  will  sur- 
prise the  holder  of  his  grain-receipt,  who  presents  it  for  the  grain 
or  the  value  thereof,  by  saying,  "Oh,  here,  this  grain  has  been 
assessed  since  it  was  put  in,  and  I  guess  the  tax  on  it  will  be  about 
3  cents  a  bushel,  but  I'll  let  you  off  for  2l/2  !"  As  the  North  Da- 
kota law  stands,  it  has  proved  to  be  a  sufficient  nuisance  to  induce 
grain  warehousemen  to  go  into  the  courts  and  claim  that  it  is  un- 
constitutional. The  supreme  court  of  that  state,  however,  upheld 
the  law  mMinncapolis  &  Northern  Elevator  Co.  v.  Trail!  County, 
9  N.  D.  213.  A  characteristic  passage  of  the  opinion  is  the  fol- 
lowing: "It  is  entirely  clear  that  the  assessment  required  to  be 
made  [by  section  i  of  said  statute],  *  *  *  is  against  the 
person,  firm,  company  or  corporation  having  the  actual  physical 
possession  and  control  of  the  grain  assessed,  and  without  any 
reference  to  ownership  than  that  furnished  by  possession.  The 
tax  is  assessed  against  the  possessor  and  against  no  one  else.  It 
is  well  settled  that  the  power  of  the  state  as  to  the  mode,  form 
and  extent  of  taxation  is  unlimited  when  the  subjects  to  which 
it  applies  are  within  the  jurisdiction,  unless  restricted  by  consti- 
tutional provisions."  —  State  Tax  on  Foreign-held  Bonds,  15  Wall. 


In  the  Foreign-held  Bond  case,  just  cited,  the  federal  supreme 
court  holds  broadly  that,  "unless  restrained  by  provisions  of  the 
federal  Constitution,  the  power  of  the  state  as  to  the  mode,  form, 
and  extent  of  taxation  is  unlimited,  w~here  the  subjects  [meaning 
the  property]  to  which  it  applies  are  within  her  jurisdiction."  The 
reader  must  be  cautioned  that  "the  power  of  the  state"  in  the  pas- 
sage just  quoted  means  in  practical  effect  "the  power  of  the  state 
legislature,"  except  in  so  far  as  limited  by  the  state  constitution. 
The  state,  having  full  power  to  amend  and  alter  her  own"  con- 
stitution, is  not  in  fact  limited  thereby  in  the  technical  sense  of 
the  word,  though  her  legislature  may  be,  and  usually  is,  very 
much  limited  in  the  exercise  of  power  by  such  constitution. 


HERTIG    ON    TAXATION.  193 

Hence,  in  the  large  sense  of  the  word,  power  applied  to  the 
organic  capacity  of  the  state,  the  federal  courts  are  quite  right  in 
not  mentioning  state  constitutions  as  limiting  the  power  of  their 
respective  states. 

The  North  Dakota  court,  further  considering  said  elevator 
case,  held  said  act  of  1899  not  to  be  in  violation  of  section  176  of 
the  state  constitution,  which  runs  there  as  it  does  in  Ohio  and 
Minnesota, — "laws  shall  be  passed  taxing  by  uniform  rule  all 
property  according  to  its  true  value  in  money,"  etc.  The  elevator 
man  thought  it  was  not  a  "uniform  rule"  which  imposed  on  him 
the  burden  of  paying  another's  tax,  even  though  the  law  tried  to 
give  him  a  way  to  get  such  tax  back  again.  The  court  answered 
by  saving,  "The  only  assessment  of  this  grain  is  that  made  to 
plaintiff,  and  the  only  tax  imposed  is  that  which  plaintiff  is  re- 
quired to  pay."  Hence,  strictly  speaking,  it  is  not  another's  tax. 
And  the  court,  so  concluding,  was  consistent  in  further  holding  it 
to  be  immaterial  whether  the  lien  provided  was  an  adequate  in- 
demnity or  not :  "Having  reached  the  conclusion  that  it  is  within 
the  taxing  power  of  the  state  to  assess  and  tax  grain  to  a  party  in 
possession,  the  question  as  to  whether  a  sufficient  or  any  provis- 
ion has  been  made  to  indemnifv  the  tax-payer  against  possible 
loss  does  not  affect  the  validity  of  the  assessment  or  tax." 

It  is  one  thing  to  find  out  that  a  particular  tax-law  is  consti- 
tutional ;  it  is  a  very  different  thing  to  find  the  same  law  a  reve- 
nue-producer. That  this  one  is  not,  North  Dakota  officials  can 
now  testify. 

To  chase  grain  in  elevators  with  a  tax  is  almost  as  elusive  and 
delusive  as  to  chase  money  for  the  like  purpose.  We  may  be 
sure  that  among-  the  several  American  states,  all  competing  with 
each  other  for  the  advantages  of  commerce  and  internal  improve- 
ment, some  will  not  be  blind  to  the  easy  chances  afforded  by  the 
blunders  of  neighboring-  states,  and  will  even  connive  at  violation 
or  unauthorized  suspension  of  their  own  laws  to  build  up  com- 
merce and  internal  improvements.  We  may  also  be-  sure  that 
a  law  driving-  prain  out  of  elevators  at  a  fixed  and  arbitrary  time 
or  times  will  diminish  to  some  extent  the  normal  profit  in  oper- 
ating- the  same,  and  that  such  diminished  profit  will  tend  to  disap- 
pear in  lower  prices  to  the  farmer  for  his  grain.  It  is  proper  to 
assess  an  elevator  as  other  tangible  and  unconcealable  property  is 
assessed ;  it  would  be  proper  to  impose  an  additional  tax  in  the 
nature  of  a  privilege,  or  franchise,  tax  upon  grain  elevators, 
which  mi^ht  be  justly  computed  bv  enacting-  that  such  franchise 
tax  should  be  enual  to  the  sum  produced  bv  the  current  rate  of 
taxation,  if  levied  on  bushels  of  No.  2  wheat  qsses^ed  to  full 
market  value  to  the  number  expressed  by  one-tenth  of  the  capacity 


194  HERTIG    ON     TAXATION. 

of  each  elevator.  Thus  an  elevator  having  a  capacity  of  one  mil- 
lion bushels,  with  No.  2  wheat  worth  seventy  cents  on  assessment 
day  at  place  of  assessment,  would  pay  a  special  franchise,  or 
privilege,  tax  equal  to  the  sum  at  current  rates  levied  on  property 
assessed  at  $70,000.00 ;  or,  as  taxes  run  in  the  city  of  Minneapo- 
lis, about  $2,100.00.  I  do  not  wish  to  make  an  issue  on  these 
particular  figures.  Whether  $2,100  is  too  high  or  too  low  a  special 
tax  for  such  elevators  to  pay,  I  leave  in  abeyance — insisting  mere- 
ly that  some  such  basis  is  the  proper  one  for  specially  taxing  ele- 
vators ;  that  such  tax  would  encourage  the  operation  of  elevators 
at  all  times  to  their  full  capacity,  would  not  tend  to  press  wheat 
to  market,  and  would  not  disturb  storage  conditions.  The  tax, 
of  course,  should  be  low  enough  not  to  drive  out  any  elevators, 
nor  hinder  the  erection  of  any  otherwise  proposed  new  ones.  As 
a  tax  on  the  instruments  of  commerce  it  should  be  discreetly 
weighed  and  cautiously  imposed ;  in  any  event,  its  yield  should 
not  be  dependent  on  mere  luck  or  caprice — like  that  which  the 
late  Charles  A.  Pillsbury  induced  the  Minneapolis  elevator  men 
to  pay  some  years  ago.  He  got  them  to  seal  their  hard  consent 
on  an  assessment  of  seven  cents  per  bushel  for  the  wheat  in  their 
elevators,  which  the  assessor  gladly  consented  to  make,  and  on 
which  they  paid  tax  at  current  rates,  say,  one  dollar  on  every 
five  hundred  bushels  of  wheat.  Where  the  law  is  plain  and  cer- 
tain, and  the  tax  reasonable  in  amount,  tax-payers  will  pay  more 
or  less  cheerfully,  but  they  will  pay.  When  the  law  is  foolish, 
unjust,  impractical,  attempting  the  impossible  and  so  failing  in 
execution, — tax-payers,  with  eyes  open  to  the  law's  weakness, 
will  look  upon  it  as  rather  meritorious  than  otherwise  to  evade 
the  law,  or  do  like  the  elevator  men  did  under  that  seven-cents-a- 
bushel  arrangement,  make  a  voluntary  payment  as  they  might 
have  done  for  the  benefit  of  a  church  or  Sunday-school.  The  tax 
commissioners  of  West  Virginia,  in  1884,  made  complaint,  it  may 
be  observed  "that  the  payment  of  the  tax  on  personalty  is  al- 
most as  voluntary  and  is  considered  pretty  much  in  the  same  light 
as  donations  to  the  neighborhood  church  or  Sunday-school." 

Section  32  of  the  Minnesota  tax  commission's  proposed  code 
contains  elaborate  directions  in  n  numbered  paragraphs  as  to 
who  shall  list  taxable  personal  property — owner,  agent,  trustee, 
guardian,  conservator,  executor,  husband,  receiver,  corporation's 
officer,  partner,  pawnbroker.  Paragraph  5  shows  a  curious  sur- 
vival of  the  letter  of  old  laws  in  opposition  to  the  modern  spirit 
of  the  laws.  Tt  provides  for  listing  "the  property  of  a  wife  by 
her  husband  if  of  sound  mind  ;  if  not,  by  herself  {"Senator  Wilson 
ironically  asked  one  of  the  commissioners  if  this  was  not  an  over- 
sight ;  if  the  commission  had  not  failed  to  consider  the  splendid 


HERTIG    ON     TAXATION.  195 

revenues  that  might  be  derived  from  the  rivalry  of  rich  wives  in 
their  diamonds, — if  it  were  made  obligatory  on  them  to 
do  their  own  listing ! 

Sections  33  and  34  impose  on  the  consignee  of  property  held 
by  him  on  the  first  day  of  April,  ''consigned  or  delivered  to  him 
from  any  place  within  this  state,"  the  duty  of  making  a  sworn 
statement  of  such  property  and  of  its  respective  owners  and  their 
places  of  residence ;  whereupon  the  local  assessor  shall  assess 
to  the  owners  within  his  district  their  respective  shares  of  the 
same,  if  they  have  not  already  made  honest  returns  thereof  and 
been  assessed  on  the  same ;  and  then  the  local  assessor  must  send 
the  consignee's  statement  to  the  county  supervisor  of  assessments, 
who  is  to  see  that  no  man  on  the  list  within  his  county  and  out- 
side the  local  assessor's  bailiwick  shall  escape.  That  duty  done, 
the  county  supervisor  is  to  notify  his  colleagues  in  other  counties 
what  said  consignee's  statement  shows  as  to  the  property  of  resi- 
dents in  said  other  counties ;  and  the  colleagues  in  turn  shall  see 
to  it  that  no  guilty  consignor  resident  in  their  counties  escape. 
Now,  as  it  is  made  the  consignor's  own  duty  to  list  his  property, 
including  any  that  he  may  have  so  consigned,  and  as  section  41 
prescribes  an  iron-clad  oath  which  every  lister  "shall  annually 
make  out  and  deliver  to  the  assessor  between  the  first  day  of 
April  and  the  first  day  of  July,"  to  the  effect  that  he,  said  lister, 
solemnly  swears  (or  affirms)  that  to  the  best  of  his  "knowledge, 
information  and  belief,  the  foregoing  statement  [of  the  property 
to  which  this  oath  is  appended]  contains  a  true,  full  and  complete 
list  of  all  property  held,  controlled,  or  belonging:  to  me  [him] 
on  the  first  day  of  April,  19 — ,  including  all  personal  property 
pertaining  to  merchandising,  manufacturing,  or  otherwise,  and 
that  where  I  [he]  have  been  unable  to  exhibit  any  class  of  per- 
sonal property  to  the  assessor,  such  property  has  been  fully  and 
fairly  described  and  its  true  condition  and  value  represented ;  that 
I  [he]  have  in  no  case  sought  to  mislead  the  assessor  as  to  either 
quantity,  quality  or  value  of  property,  and  that  the  deductions 
claimed  from  credits  are  bona  fide  debts  for  a  consideration  re- 
ceived, and  do  not  consist  in  any  part  in  bonds,  notes  or  obliga- 
tions of  any  kind,  given  to  any  insurance  company  on  account  of 
premiums  or  policies,  nor  on  account  of  any  unpaid  subscriptions 
to  any  corporation,  institution  or  society,  nor  on  account  of  any 
subscription  to  or  indebtedness  payable  on  capital  stock  of  any 
company,  whether  incorporated  or  unincorporated ;  that  since  the 
first  day  of  April  of  last  year  I  [he]  have  not,  directly  or  indi- 
rectly, converted  or  exchanged  any  of  my  [his]  property  tem- 
porarily for  the  purpose  of  evading  the  assessment  thereof  for 
taxes,  into  non-taxable  property  or  securities  of  any  kind ;  and 


196  HERTIG    ON     TAXATION. 

that  I  [he]  have,  to  the  best  of  my  [his]  knowledge  and  judg- 
ment, valued  said  property  at  its  true  cash  value,  by  which  I  [he] 
mean  the  usual  selling  price,  being  the  price  which  could  be  ob- 
tained for  such  property  at  private  sale,  and  not  at  forced  or 
auction  sale ;" — now,  I  repeat,  as  it  is  made  the  consignor's  own 
imperative  duty  to  make  such  oath,  why,  if  oaths  are  effective, 
seek  the  "double  cinch"  of  checking  the  individual  lister  by  ex- 
acting also  an  iron-clad  sworn- statement  from  consignees?  Are 
consignors  unduly  forgetful  or  perjury-full?  Is  the  fair  name  of 
him  who  consigns  produce  to  be  sold  for  his  account  to  be  thus 
invidiously  attacked  ?  It  is  well  known  that  the  Village  Hog  has 
money  "at  usury,"  and  that  his  more  tangible  but  less  well-fixed 
neighbor,  wincing  at  the  injustice  of  the  fact,  leads  him  far  and 
away  in  amount  of  taxes  paid.  When  tax-code  makers  cast 
about  for  oaths  to  affix,  why  not  provide  for  taking  the  oath  of 
each  man  to  whom  the  Hog  is  reputed  to  have  lent  money,  and 
thus  uncover  the  Hog's  hidden  "credits !" 

It  is  true  that  in  section  42,  hard  following  the  oath-presenting 
one,  the  assessor  is  given  cross-examining  powers,  but  these  are 
negligently  left  discretionary :  "Whenever  the  assessor  shall  be 
of  the  opinion  that  any  person,  company  or  corporation  has  not 
made  a  full,  fair  and  complete  list  of  personal  property  which  he 
is  required  to  list  for  the  purposes  of  taxation,  he  shall  examine 
such  person  under  oath  in  regard  to  the  classes  and  -amount  of 
the  property  he  is  required  to  list."  Is  a  poor  assessor  dependent 
on  the  good-will  of  his  constituents  for  his  present,  and  a  future 
better,  office,  perhaps  expected, — is  a  poor  assessor  to  take  the  in- 
itiative and  tell  neighbor  Thompson  that  he,  the  assessor,  is  of  the 
opinion  that  neighbor  Thompson  has  perjured  himself,  and  so 
must  give  him  a  chance  under  sworn  cross-examination  to  repeat 
or  correct  the  perjury?  The  law  for  these  hundred  years  in 
American  states  has  kept  lamentine.  through  exponents  of  more 
or  less  authority,  that  vast  quantities  of  personal  property  are 
hidden  against  taxation  ;  let  the  law.  if  it  believes  in  itself  and 
in  its  exponents,  frankly  presume  th?.t  everv  lister  is  a  liar,  and 
require  the  assessor  to  cross-examine  accordingly.  He  can  then 
point  to  its  mandate  and  say  to  neighbor  Thompson,  "You  see.  I 
have  no  choice."  Section  42  further  requires  him,  in  case  he 
thinks  neighbor  Thompson  has  rot  made  that  "full,  fair  and  com- 
plete list"  which  is  the  law's  ideal,  to  examine  not  only  Thomp- 
son, but  also  "to  examine  on  oath  any  other  person  whom  he  be- 
lieves to  have  knowledge  of  the  amount  or  value  of  any  property 
owned,  held  or  controlled  by  such  person,  company  or  corpora- 
tion." But  here,  too,  the  original  sin  of  leaving  the  initiation 
to  his  discretion  acts  as  a  damper  on  his  calling  in  and  examining 


HERTIG    ON     TAXATION.  197 

those  persons  who  might  help  him  to  uncover  ^-the  "credits"  of 
the  Village  Hog.  These  laxities,  common,  I  believe,  to  the  tax 
codes  of  all  American  states,  seem  to  show  that  the  law  has  a 
semi-consciousness  of  its  own  absurdity,  and  feels  it  better  to  be 
quietly  evaded  by  a  tacit,  undeclared  sort  of  loop-hole  (the  as- 
sessor's discretion),  than  by  a  visible  riying-leap  over  the  hedge — 
sure  to  result  if  the  assessor  and  his  constituents  were  cornered 
by  the  revoking  of  his  discretionary  powers.  So  also  the  penal- 
ties provided  in  section  43  for  refusal  "to  swear,"  or  refusal  "to 
testify,"  together  with  the  machinery  for  applying  the  same, 
would  have  proved  vain  and  inoperative  had  the  commission's 
code  been  enacted.  Practically  nobody,  when  required  by  the 
assessor,  would  have  refused  to  swear  or  to  testify — after  a 
fashion ;  hence  the  assessor,  like  the  good  fellow  that  he  almost 
always  is,  would  very  seldom  indeed  have  felt  it  necessary  "to 
apply  to  any  clerk  of  the  district  court,  or  any  justice  of  the 
peace  in  his  county,  for  a  subpoena  requiring  such"  recusant 
"person,  or  an  officer  or  agent  of  any  such  company  or  corpora- 
tion, to  appear,"  etc. ;  and  hence  also  the  penalty  for  failure  "to 
appear  and  answer  under  oath,"  in  obedience  to  such  subpoena, 
would  have  been  very  seldom  invoked, — the  penalty,  namely, 
which  section  43  says,  "shall  be  a  contempt  of  court,  and  may  be 
punished  by  a  fine  of  not  more  than  one  hundred  dollars,  or  by 
imprisonment  not  exceeding  thirty  days." 

Those  sections  which  follow  up  the  should-have-been  lister 
who  was  sick  or  absent  at  listing  time  (sees.  44  and  45)  ;  those 
prescribing  the  adding  of  fees  and  costs  of  said  subpoena  to  the 
other  taxes  of  him  who  would  not  otherwise  swear  or  testify,  en- 
abling the  sick  or  absent  lister  to  purge  himself  of  the  evil  conse- 
quences of  his  sickness  or  absence  (sees.  46  and  4^),  still  pur- 
suing invalid  or  absentee  (sec.  48),  visiting  any  false  or  fraudu- 
lent lister  with  the  thunder  of  a  misdemeanor  carrying  a  fine  of 
not  less  than  fifty  nor  more  than  five  thousand  dollars,  yet  kindly 
giving  the  poor  or  stubborn  man  a  chance  to  snap  his  fingers 
at  the  fine  by  lingering  in  "the  county  jail  *  *  *  not  ex- 
ceeding a  period  of  six  months"  vsec.  49),  rock-bottoming  listing 
and  values,  where  other  means  fail,  on  the  assessor's  best  judg- 
ment and  information,  pieced  out  with  such  oath-given  scraps  as 
he  may  pick  up  over  the  country  at  large  (sec.  50),  reminding 
the  assessor  that  he,  too,  is  mortal  and  fallible,  and  "liable  to  a 
penalty  of  twenty-five  dollars"  if  he  takes  anybody's  unsworn 
statement  or  unsworn  word  where  the  law  says  oath,  and  so  liable 
"for  every  such  acceptance"  (sec.  51),  following  up  the  assessor, 
deputy  assessor,  or  county  supervisor  of  assessment  who  may  be 
guilty  of  "any  such  acceptance  of  an  unsworn  list,"  with  what  for 


198  HERTIG    ON     TAXATION. 

a  free-born  American  is  "the  most  unkindest  cut  of  all" — that 
such  acceptance  "shall  be  sufficient  cause  for  his  removal  from 
office"  (Id), — even  those  sections  may  escape  further  mention 
with  no  more  serious  damage  to  the  reader  than  they  would  have 
worked  damage,  had  they  been  enacted,  to  the  Minnesota  tax- 
payer's pocket. 

In  section  52,  the  would-be  code  indicates  that  its  work,  like 
woman's,  is  never  done ;  and  its  oaths  though  as  numerous  and 
vehement  as  Uncle  Toby  said  those  were  which  were  sworn  by 
"our  army  in  Flanders,"  are  never  searching  enough.  It  there- 
fore makes  it  "the  duty  of  every  assessor  to  report  to  the  county 
auditor"  any  property  taxable  but  unlisted,  discovered  by  him 
or  brought  to  his  attention  after  June  3Qth,  the  day  set  for  the 
formal  closing  of  his  books.  Section  53  would  do  equity  to  school 
districts  by  prescribing  the  keeping  of  exact  "tab"  on  the  assess- 
ments assessable  in  each — by  setting  the  proper  baptismal  number 
of  such  district  "opposite  each  assessment  in  a  column  provided 
for  that  purpose  in  the  assessment  book." 

Sections  54  and  55  doubtless  seemed  to  the  tax  commissioners 
"daisies,"  "peaches"  or  "crackerjacks,"  if  we  may  conceive  three 
such  grave  gentlemen  as  stooping  to  trivial  English  in  praise 
of  their  handiwork  "made  in  Indiana"  and  elsewhere.  By  sec- 
tion 54  each  assessor,  "immediately  upon  completing  the  assess- 
ment of  personal  property  in  any  year,"  [that  is,  when  he  is  sup- 
posed to  get  it  done,  June  30,  not  counting  later  discoveries],  is 
required  to  make  out  and  mail  to  the  county  auditor  a  statement 
showing  the  names  and  post-office  addresses  "of  all  persons  own- 
ing personal  property  subject  to  taxation  in  his  township  or  as- 
sessment district,  and  the  amount  for  which  each  of  said  tax- 
payers has  been  assessed  by  him."  By  section  55.  the  county 
auditor  shall  concentrate  his  energies  on  the  stately  "mail"  which 
the  several  statements  of  the  several  assessors  shall  heap  up  for 
him  ;  and  he  shall  immediately  on  receipt  of  said  mail  gladden 
the  heart  of  some  printer  fat  the  county's  expense]  by  causing 
"the  list  of  each  township,  ward  or  other  assessment  district  to  be 
separately  printed;"  [and  shall  thereupon,  at  his  county's  expense, 
make  contribution  to  the  postal  deficit  of  the  United  States  by 
mailing]  "to  each  person  named  in  each  of  such  lists,  at  his  place 
of  residence,  if  known,  [otherwise,  perhaps  "at"  any  old  place, 
though  the  section  is  silent  on  this  point],  a  copy  of  the  list  of  his 
township,  ward  or  other  assessment  district."  Both  sections  are 
of  the  law's  luxury  and  not  of  its  necessity,  as  section  55  express- 
ly says  in  substance  that,  if  neighbor  Thompson  and  neighbor 
Jones,  through  failure  either  of  the  assessor  to  make  out  and  mail, 
or  of  the  auditor  to  get  printed  and  to  mail — do  not  get  a  chance 


HERTIG    ON    TAXATION.  199 

to  compare  and  spy  on  each  other's  assessments,  neither  shall  have 
any  authorized  "kick  coming,"  nor  shall  such  failure  of  assessor 
or  auditor  "have  the  effect  of  impairing  or  affecting  the  assess- 
ment of  the  personal  property  of  any  such  person." 

Section  56  takes  a  bold  and  patriotic  stand  against  any  "an- 
archy" that  may  lurk  among  assessors.  Its  clearness  and  sim- 
plicity should  be  a  model  to  all  code-makers,  and  I  therefore 
quote  it  in  full :  "The  assessors  in  the  execution  'of  their  duties 
shall  use  the  forms  and  follow  the  instructions  which  shall  from 
time  to  time  be  presented  and  furnished  them  in  pursuance  of 
law." 

Section  57  provides  that  "on  or  before  the  first  day  of  July, 
annually,"  the  assessor  shall  turn  over  to  the  county  auditor  his 
assessment  books  duly  filled  out  and  showing  the  result  of  his 
work ;  also  the  separate  "lists  and  statements  of  all  persons  as- 
sessed," [duly  ballasted,  of  course,  with  the  tremendous  oath  on 
each  prescribed  in  section  41].  Said  lists  and  statements,  official 
ammunition  to  refute  or  verify,  as^  the  case  may  be,  alleged  false 
and  fraudulent  lists — are  to  be  carefully  kept  in  pickle,  "and 
preserved  in  the  office  of  the  county  auditor  for  the  period  of  three 
years  from  and  after  the  first  day  of  July  of  the  year  in  which 
they  are  so  delivered ;  and  the  county  auditor  is  hereby  author- 
ized to  destroy  the  said  lists  at  the  expiration  of  said  period." 
[This  seems  wanton  destruction.  Should  not  makers  of  such 
codes  provide  for  the  permanent  preservation  of  choice  specimens 
in  the  archives  of  the  state  historical  society  ?  Besides,  if  a  county 
auditor  at  the  end  of  each  three  year  period  were  to  wet  down 
these  lists  and  statements  into  illegible  pulp,  and  sell  the  same  to  a 
paper-mill  and  pocket  the  price,  would  he  be  guilty  of  malfeasance 
in  office  ?]  Section  57  further  provides  that  there  shall  be  attached 
to  the  assessors'  books  so  returned  an  oath  to  be  made  by  the 
assessor  or  his  deputy.  The  form  of  this  oath  is  duly  given  and 
fills  twenty-one  lines.  The  assessor,  or 'his  deputy,  must  swear  to 
full  value,  full  diligence,  and  full  avoidance  by  him  of  conniving 
"at  any  violation  or  evasion  of  any  of  the  requirements  of  law  in 
relation  to  listing  or  valuing  the  personal  property,  moneys,  cred- 
its, stocks,  or  other  property  for  taxation."  The  oath,  however, 
is  merciful  to  him  in  that  it  does  not  require  him  to  give  a  sworn 
estimate  of  the  value  of  the  moneys,  credits  and  other  personal 
property  in  his  district  that,  despite  his  efforts,  have  escaped  list- 
ing. But  such  mercy  is  not  surprising ;  for  actual  laws,  as  well  as 
mere  would-be  laws,  must  put  on  some  appearance  of  self-respect, 
and  assume  some  belief  in  their  own  efficiency.  Tax  codes  of  the 
drastic  kind,  providing  for  a  general  property  tax,  come  the  near- 
est of  any  body  of  law  to  confessing  on  their  face  that  they  are 


200  HERTIG    ON    TAXATION. 

unjust  and  inefficient  as  well — by  the  easy  and  manifold  evasion 
which  they  foresee  and  the  numerous  clumsy  provisions  which 
they  make  against  such  evasion.  The  legislature  of  Wisconsin 
has  engrafted  a  delicious  bit  of  fiat  self-respect  on  to  the  tax  code 
of  that  state — not  a  particularly  drastic  code  at  that — by  declar- 
ing, evidently  but  not  confessedly  on  the  theory  of  necessity  for 
tax-laws  to  keep  up  an  appearance  of  self-respect,  that  an  as- 
sessor may  not  afterwards  in  court  open  his  mouth  and  swear  that 
he  previously  swore  officially  to  a  return  which  was  wrong. 
There  is  a  puzzling  line  in  the  Shakespeare  sonnet — 

"When  my  love  swears  that  she  is  made  of  truth, 
I  do  believe  her,  though  I  know  she  lies." 

The  Wisconsin  legislature  has  improved  on  this  sentiment  by 
enacting  in  effect:  When  my  love  (the  assessor)  swears  he's 
true,  you  must  believe  him,  and  he  must  believe  himself,  though 
we  all  know  he  lies.  The  sentence  in  which  Wisconsin  so  decrees 
(Code  Sec.  1063)  merits  full  quotation:  "No  assessor  shall  be 
allowed  in  any  court  or  place,  by  his  oath  or  testimony,  to  contra- 
dict or  impeach  any  affidavit  or  certificate  made  or  signed  by  him 
as  such  assessor."  We  express  no  opinion,  says,  in  substance,  the 
supreme  court  of  Wisconsin,  on  whether  or  not  this  is  a  discreet 
provision;  but  it  is  within  the  legislative  discretion  to  so  enact, 
and  the  provision  is  valid. — Marshall  v.  Benson,  48  Wis.  558, 
affirming  prior  decision  of  like  effect. 

Section  58  requires  ''every  person  elected  or  appointed  to  the 
office  of  assessor"  to  file  "within  ten  days  after  he  is  notified  of 
his  election  or  appointment"  a  bond  with  at  least  one  surety, — 
bond  to  run  to  the  state  of  Minnesota,  amount  $500.00,  surety  to 
be  approved  by  county  auditor,  and  bond  to  be  filed  in  the  latter's 
office.  If  thereafter  the  assessor  does  not  "diligently,  faithfully 
and  impartially"  assess,  there  is  no  virtue  in  bonds ;  for  such  as- 
sessing is  expressly  nominated  as  the  condition  of  the  bond,  which, 
if  unfulfilled,  shall  pinch  the  assessor  and  his  surety  five  hundred 
dollars'  worth.  Here  again  comes  in  the  inevitable  oath :  "he 
shall,  moreover,  take  and  subscribe  on  said  bond  an  oath  that  he 
will,  according  to  the  best  of  his  judgment,  skill  and  ability,  dili- 
gently, faithfully  and  impartially  perform  all  the  duties  of  his 
office."  It  must  not  be  forgotten  that  multiplication  of  oaths,  ex- 
uberantly practiced  in  American  jurisprudence,  and  particularly 
in  the  administrative  policies  of  American  codes — has  leveled  flat 
all  solemnity  which  might  otherwise  have  kept  up  in  oaths;  that 
the  ensuing  multiplicity  of  perjury  has  taken,  so  to  speak,  all  the 
edge  oif  that  crime,  and  made  it  as  safe  and  abundant  as  common 


HERTIG    ON    TAXATION.  201 

lying.  If  anything  is  proved  by  American  tax  experience  it  is 
that  the  assessor's  oath  before  and  after,  flanked  by  the  intermedi- 
ate oaths  of  his  subjects  or  victims,  does  not  materially  raise  the 
percentage  which  the  assessed  value  of  personal  property  is  of 
the  total  assessed  value  of  all  the  property  in  a  given  state. 

Section  59  provides  for  the  appointment  of  a  bonded  and 
sworn  deputy  assessor,  when  the  assessor  deems  such  deputy  nec- 
essary for  the  completion  of  the  work  in  his  district  by  the  date 
set  therefor. 

Section  60  imposes  upon  the  county  auditor  the  duty  of  acting 
as  first  revisor  and  corrector  of  the  assessors'  returns — to  the  ex- 
tent of  any  belief  or  information  he  may  have  "that  the  assessor 
has  not  returned  the  full  amount  of  all  property  required  to  be 
listed  in  his  township  or  district,"  or  "that  any  person  has  given 
to  the  assessor  a  false  statement  of  his  personal  property."  The 
auditor's  belief  must  be  based  on  "reason,"  not  on  mere  caprice. 
Though  the  commission  does  not  say  so,  reasons  must  be  as  plen- 
tiful as  blackberries  in  August,  perhaps  more  so,  to  move  him  to 
believe,  or  rather  to  intimate,  that  any  voting  constituent  of  his 
has  perjured  himself  before  the  assessor.  County  auditors  have 
been  known  to  be  triumphantly  re-elected  term  after  term.  Even 
after  the  county  board  of  review  has  taken  its  turn  at  correcting 
the  assessments,  the  duty  and  jurisdiction  of  the  auditor  continue, 
so  that  any  new  fact  which  comes  to  him  in  belief  or  information, 
and  showing  the  new  law  to  have  been  blind  to  some  or  all  of 
neighbor  Thompson's  or  neighbor  Jones'  personal  property  must 
be  given  straightway  hospitality  on  the  returns :  "he  shall  imme- 
diately proceed  to  correct  the  return  of  the  assessor  and  to  charge 
the  owners  of  such  property  on  the  tax  lists  with  the  proper 
amount  of  taxes ;  and  in  the  performance  of  the  duties  aforesaid 
he  is  hereby  authorized  and  empowered  to  issue  compulsory  pro- 
cess [that  is,  is  made  prosecuting  attorney  and  court  in  one], 
and  to  require  the  attendance  of  any  person  whom  he  may  believe 
to  have  knowledge  of  the  existence,  location,  or  value  of  such 
property,  and  to  examine  such  person  on  oath  in  relation  to  such 
statement  or  return  ;  and  the  auditor  in  all  such  cases  shall  notify 
every  such  person  before  making  the  entry  on  the  tax  list,  that 
he  may  have  an  opportunity  of  showing  that  his  statement  or  the 
return  of  the  assessor  is  correct ;  and  the  county  auditor  shall,  ih 
all  cases,  file  in  his  office  a  statement  of  the  facts  or  evidence  upon 
which  he  made  such  corrections."  Observe  now  the  fear  that  this 
would-be  laws  displays  lest  k  be  evaded ;  how  it  distrusts  aver- 
age human  nature  even  as  exemplified  in  county  auditors !  The 
auditor  is  made  simply  a  "jacking-up"  tribunal;  "he  shall  in  no 
case  reduce  the  amount  returned  by  the  assessor,  without  the 


202  HERTIG    ON     TAXATION. 

written  consent  of  the  tax  commission,  on  a  statement  of  the  case 
submitted  by  the  county  auditor  or  the  party  aggrieved." 

Section  61  virtually  admits  that  notwithstanding  all  the  new 
code's  manifold  precautions,  officers  and  oaths,  the  dodging  tax- 
payer will  still  be  able  to  dodge.  It  says  in  substance  :  "You  may 
dodge  me  this  year,  as  you  did  last  year;  you  may  dodge  me 
next  year  and  the  next,  but  if  you  do,  I  enact  that  'if  any  personal 
property  subject  to  taxation  be  omitted  in  the  assessment  of  any 
year  or  years,'  it  shall  go  on  to  the  tax  lists  for  the  current  year, 
and  be  hit  for  the  taxes  it  should  have  paid  for  any  year  with 
seven  per  cent  interest  on  the  proper  amount  so,  as  aforesaid,  suc- 
cessfully dodged,  from  the  time  of  such  dodging,  until  I  finally 
enforce  payment.  Familiar  doctrine,  my  good  man,  that  the 
statute  of  limitations  never  outlaws  a  prosecution  for  murder ;  I 
put  you  in  the  same  class  as  murderers — no  statute  of  limitations 
for  tax-dodgers !  And  this,  whether  the  dodging  results  from 
.your  fault  or  'any  erroneous  proceedings'  of  mine,  or  from  any 
'other  cause !'  ' 

The  next  section  to  take  up  the  burden  of  making  the  law 
more  binding  is  section  119,  providing  for  the  appointment  in 
each  county  of  a  "county  supervisor  of  assessment"  by  the  board 
of  county  commissioners  of  such  county.  At  the  general  elections 
in  1902,  the  new  office  to  become  elective,  and  the  new  officers 
then  elected  as  county  supervisors  of  assessment  shall  succeed 
such  appointees.  Appointed  or  elected,  each  such,  officer  shall 
give  a  bond  in  the  sum  of  five  thousand  dollars  and  take  and  sub- 
scribe the  usual  routine  oath  of  office.  Provision  is  made  for  his 
removal  from  office  for  "malfeasance  or  nonfeasance"  (sec.  120), 
and  for  his  suspension  pending  the  investigation  of  charges 
against  him  (Id.)  ;  "he  shall,  subject  to  the  advice  and  instruction 
of  the  Tax  Commission,  have  full  and  complete  supervision  and 
direction  of  the  work  of  assessors  in  his  county,  and  is  required 
to  advise  and  instruct  them  as  to  their  duties"  (sec.  121)  ;  he  shall 
at  least  once  a  year,  and  as  many  other  times  "as  may  be  neces- 
sary," "personally  visit  each  town,  city  and  village  in  his  county," 
shall  "have  access  to  all  public  records,  books  and  papers  of  offi- 
cers throughout  the  county,"  and  shall  use  his  powers  and  oppor- 
tunities "to  the  end  that  he  may  secure  accurate  knowledge,  and" 
lest  there  be  a  misunderstanding  as  to  the  meaning  of  "accurate 
knowledge," — "full  information  of  the  assessment  of  property," 
and  of  tax  matters  generally  "in  the  several  assessment  districts  of 
his  county"  (sec.  122)  ;  he  "shall  examine  and  test  the  work  of  as- 
sessors during  the  progress  of  assessments,  and  shall  have  the 
power  to  personally  value  and  assess  different  kinds  and  classes  of 
property  previously  assessed  by  the  assessor,  so  that  he  may  ascer- 


HERTIG     ON     TAXATION.  203 

tain  whether  such  assessor  is  assessing  property  at  full  value  or  is 
omitting  property  subject  to  taxation  from  the  roll"  (sec.  123.) 
|  Note  again  the  charming  skepticism  of  the  proposed  law  as  to 
whether  the  bond-bound  and  two-oath-bound  local  assessor — 
aided  by  oath-bound  listers  and  power  to  swear  the  whole  neigh- 
borhood— will  be  of  any  real  efficiency,  since  it  requires  the 
county  supervisor  to  keep  the  local  assessor  and  the  lister 
"guessing"  in  both  the  slang  and  the  technical  sense  of  that 
word.]  Sec.  123  further  gives  him  "all  the  rights  and  powers  of 
an  assessor  for  the  examination  of  persons  and  property,  and  for 
the  discovery  and  assessment  of  property  subject  to  taxation," 
and,  lest  he  tall  into  the  easy  ways  of  King  Log,  sharply  reminds 
him  that  he,  too,  is  subject  to  superior  mandate:  "he  shall  make 
such  assessments  or  re-assessments  of  property  as  shall  be  required 
of  him  by  the  Tax  Commission  or  the  County  Board  of  Review." 
He  is  to  further  load  the  county  auditor  with  written  ammuni- 
tion to  better  open  before  the  County  Board  01  Review  such  cof- 
fers as  shall  have  proved  impervious  to  oaths  and  to  his  and  the 
local  assessors  prior  charges — provided  he  gets  wind  of  such 
coffers  "betwixt  and  between,"  that  is  to  say,  after  the  first  hurly- 
burly  "and  before  the  meeting  of  the  County  Board  of  Review." 
Even  after  such  meeting,  he  may  not  lay  aside  his  spurs,  take 
slippered  ease,  and  draw  his  salary  in  peace,  but  shall  continu- 
ally bear  in  mind  that  the  most  elaborate  tax  laws  are  made  to  be 
evaded,  and  shall  continue  to  keep  his  eyes  open,  and  "report  to 
the  county  auditor  at  any  time  during  the  year  any  omitted  prop- 
erty that  he  may  discover  subject  to  taxation,  together  with  the 
value  thereof,  and  the  auditor  shall  thereupon  assess  the  same  for 
the  proper  year  or  years." 

If  the  county  supervisor  shall  prove  to  l:e  a  smooth  man  and 
a  person  pleasing  to  the  county  commissioners,  he  may  go  junk- 
eting at  his  county's  expense;  for  section  124  empowers  him  still 
to  pursue  the  villainous  tax-dodger  into  "another  county  or 
state,"  if  the  supervisor  believes  that  evidence  of  such  tax-dodg- 
ing exists  in  "such  other  county  or  state,"  and  can  convince  the 
county  commissioners  that  he  may  safely  absent  himself  awhile 
from  his  oath-bound  but  squirming  local  assessors  and  tax-dodg- 
ing subjects  and  convince  them  also  that  the  expense  of  the  pro- 
posed trip  "is  warranted."  Thereupon  the  board  may  let  him 
go,  and,  if  it  does,  "shall  allow  him  such  reasonable  sum,  payable 
out  of  the  general  revenues  of  the  county,  to  defray  his  necessary 
expenses  of  travel  and  examination,  as  it  shall  deem  proper." 

Section  125  affords  the  county  supervisor  every  facility  for 
becoming  a  county  boss  by  giving  him  an  additional  whip  over 
his  lieutenants,  the  local  assessors.  He  shall  complain  of  any  as- 


204  HERTIG    ON    TAXATION. 

sessor  to  the  governor  "whenever  he  ascertains  or  has  good  rea- 
son to  believe  that  any  assessor  is  guilty  of  a  violation  of  any 
of  the  provisions  of  this  act."  The  section  is  silent  as  to  the 
many  opportunities  "this  act"  affords  for  honoring  it  more  in  the 
breach  than  in  the  observance ;  is  silent  also  as  to  the  many  op- 
portunities it  gives  to  the  county  supervisor  to  be  excusably 
blind  or  maliciously  sharp-sighted,  at  his  pleasure. 

Section  126  requires  him  to  "make  out  a  report  in  duplicate 
showing  in  detail  the  work  of  assessors  in  each  of  the  several 
districts  in  his  county,  the  failure,  if  any,  of  assessors  or  property 
owners  to  comply  with  the  law,  the  relative  assessed  and  true 
value  of  property  in  each  assessment  district,  and  all  such  other 
information  and  statistics  which  he  may  have  obtained  that  will 
be  of  assistance  in  determining  the  relative  value  of  all  taxable 
property  in  each  town,  city  and  village  in  the  county."  The 
county  auditor  gets  one  copy  of  this  report,  "the  Tax  Commis- 
sion at  the  capital  of  the  state"  gets  the  other.  The  above 
clause  which  I  have  put  in  italics  is  truly  delicious ;  it  implies 
beyond  question  that,  despite  all  the  new  and  cumbersome  tax 
machinery,  the  proposed  law  knows  that  it  will  be  generally 
evaded,  and  that  therefore  the  assessed  value  will  not  be  the  same 
as  the  true  value ;  but  it  has  solemnly  decreed  that  these  values 
must  and  will  be  the  same,  has  "blown  itself,"  as  the  street  says, 
to  the  utmost  to  make  them  the  same ;  yet  solemnly  requires  its 
brand-new  county  supervisor  of  assessment  to  write  down  him- 
self and  itself  as  example  of  self-stultifying  asininity.  Such 
report  as  to  "the  relative  assessed  and  true  value  of  property" 
would  run,  if  reduced  to  the  simplest  and  truest  possible  form  of 
expression,  about  as  follows :  "Between  us  all,  we  have  hoisted 
assessed  values  somewhat  above  the  figure  attained  under  the  old 
law ;  but  I  have  confidential  information  that  in  such  and  such 
counties,  the  rise  is  nothing  to  speak  of,  and  scores  of  persons 
predict  we  shall  not  be  able  to  maintain  the  rise  here.  We  have 
raised  somewhat  the  percentage  of  the  assessed  value  of  personal 
property  on  total  assessed  values  ;  but  we  shall  never  be  able  to 
get  it  above  20  or  2$  per  cent  of  the  whole.  Our  constituents 
mock  the  law  and  make  fools  of  us  in  their  valuations — some 
30,  or  50  or  80  per  cent,  more  or  less." 

Sections  127  and  128  fix  the  compensation  of  the  county  su- 
pervisor. In  counties  of  less  than  75,000  inhabitants  he  is  to 
get  $4.00  per  day  "for  the  time  actually  employed  by  him  in  the 
discharge  of  the  duties  of  his  office."  Out  of  this  it  would  seem 
that  he  is  to  pay  "all  of  his  expenses,"  except  as  above  provided 
in  section  124,  the  junketing  section.  In  counties  "having  a  pop- 
ulation of  more  than  seventy-five  thousand,"  he  "shall  devote  his 


HERTIG    ON    TAXATION.  205 

entire  time  to  the  duties  of  his  office,  and  shall  receive  an  annual 
salary  of  not  less  than  eighteen  hundred  dollars,  nor  more  than 
three  thousand  dollars,"  to  be  paid  by  his  county,  and  to  be  fixed 
within  the  county  named  by  the  board  of  county  commissioners. 
Sections  129-142  inclusive  provide  for  the  creation,  salaries 
and  duties  of  a  tax  commission  to  consist  of  "three  qualified  elec- 
tors of  this  state."  They  each  take  the  usual  perfunctory  oath 
of  office,  and  each  gives  a  bond  in  the  penal  sum  of  ten  thousand 
dollars.  They  are  to  be  appointed  by  the  governor, — the  first 
set  for  two,  four  and  six  years  individually,  that  the  term  of  one 
of  them  may  expire  every  two  years  ;  thenceforward  the  term  for 
each  of  them  shall  be  six  years,  except  as  vacated  by  death,  resig- 
nation or  removal.  "Each  tax  commissioner  shall  receive  an 
annual  salary  of  three  thousand  dollars."  He  shall  also  be  allowed 
his  "necessary  expenses  in  the  performance  of  the  duties  imposed 
by  this  act,  the  same  to  be  approved  by  the  state  board  of  review." 
Provision  is  made  for  "a  competent  stenographer  as  secretary," 
at  not  exceeding  twelve  hundred  dollars  a  year,  and  for  "addi- 
tional clerical  or  other  assistants."  if  reasonably  required.  The 
commissioners  are  to  sit  in  a  state-provided  office  at  the  capital, 
and  hold  obligatory  sessions  on  the  first  Tuesday  of  April.  July, 
August,  continuously  during  the  month  of  September  until  the 
third  Tuesday  thereof  in  each  year,  and  may  hold  such  ad- 
journed sessions  as  thev  may  deem  necessary.  The  chairman  may 
call  special  sessions  to  be  held  at  any  place  in  the  state,  at  his  dis- 
cretion, and  must  call  them  when  and  where  in  the  state  the  other 
members  of  the  commission  shall  in  writing  request.  It  is  grant- 
ed full  access  to  such  state-filed  or  locally-filed  documents  as  it 
may  want  to  examine,  and  all  local  offices  "shall  in  the  form  pre- 
scribed" by  it  "make  returns  to  it  of  all  information  which  it  may 
call  for."  It  may  issue  subpoenas,  as  out  of  any  court,  compel 
attendance  of  witnesses,  swear  and  examine  them ;  may  compel 
"the  production  of  any  book,  document  or  paper."  It  may  not 
itself  attach  or  fine  a  witness  who  refuses  to  appear  or  produce, 
but  the  district  court  or  a  justice  of  the  peace  is  wide  open  to  it 
in  that  behalf.  The  obedient  witness  gets  compensation  for  at- 
tendance, to  be  fixed  by  the  commission,  but  not  to  exceed  "the 
amount  of  travel  and  attendance  fees- allowed  by  law  to  a  witness 
in  the  district  court."  The  subpoena-server  gets  the  usual  com- 
pensation for  his  work.  In  section  135  the  commission  is  author- 
ized and  required  in  fifteen  numbered  paragraphs  to  do  and  per- 
form a  wide  range  of  duties, — all  proper  and  important,  if  a  per- 
manent tax  commission  shall  be  created.  To  exercise  oreneral 
supervision  over  county  and  other  local  tax  officials,  to  investi- 
gate and  report  as  to  inheritances,  to  reduce  or  increase  the  as- 


^06  HERTIG    ON     TAXATION. 

sessme: :  t  of  mineral  lands  as  may  be  necessary  in  years  when  no 
real-estate  assessment  is  made,  to  prescribe  forms  of  assessment 
books  and  blanks,  to  confer  with  assessing  officers,  to  file  com- 
plaints with  the  governor  against  assessing  officers  or  other 
official  violators  of  the  tax  laws ;  to  investigate  irregular  assess- 
ments, to  visit  counties,  to  scrutinize  the  valuations  of  public 
service  companies  and  see  that  railroad  companies  make  faithful 
report  of  gross  earnings,  to  make  comparative  studies  in  the  reve- 
nue laws  and  systems  of  other  states  and  countries,  to  keep  in 
hand  and  properly  classify  the  workings  of  the  home  system,  and 
draw  up  and  recommend  necessary  additional  legislation,  to  make 
proper  abatement  of  taxes  after  full  investigation,  to  bring  to  the 
attention  of  county  boards  of  review  and  the  state  board  of  re- 
view tax  matters  of  special  importance  to  each,  to  make  record  of 
its  official  acts  and  expenditures, — these  of  course  are  duties  not 
only  of  the  highest  importance  to  the  working  of  a  code  like  the 
proposed  one,  but,  with  some  modifications,  many  of  them  would 
be  advantageously  performed  by  a  specially  authorized  man  or 
board  .under  any  system  of  taxation. 

Section  136  is  a  mere  value-hoisting  device,  and  empowers  the 
commission  when  not  satisfied  with  the  assessment  in  any  assess- 
ment district  to  "direct  the  county  supervisor  of  assessment  to  re- 
assess all  or  any  part  of  the  taxable  property  in  such  district," 
and  report  his  work  against  a  prescribed  date.  That  officer  hav- 
ing already  plenty  to  do,  will,  if  he  desires  to  please  the  commis- 
sion, mark  up  values  arbitrarily ;  if  he  desires  more  to  please  his 
local  constituents,  his  reassessment  will  not  differ  much  from  the 
one  which  failed  to  satisfy  the  commission. 

Appeals  from  the  county  boards  of  review  are  passed  upon  by 
the  commission  (Sec.  137)  ;  it  reports  the  reassessments  it  has  or- 
dered, and  the  disposition  of  the  appeals  it  has  heard,  to  the  state 
board  of  review  (Sec.  138)  ;  it  has  inquisitorial  power  to  exact 
reports  from  every  person,  firm  and  corporation  relative  to  his  or 
its  property,  and  has  the  right  to  inspect  his  or  its  books,  ac- 
counts, papers  and  property* (Sec.  139)  ;  it  has  original  jurisdic- 
tion, if  it  chooses  to  exercise  the  same,  to  repair  and  supplement 
the  work,  or  undone  work,  of  county  and  other  local  tax  officials, 
by  ferreting  out  any  property  that  may  have  escaped  taxation  in 
prior  years,  and  compelling  the  county  auditor  to  increase  by  the 
amount  of  its  discoveries  the  current  valuations  of  the  guilty 
dodgers'  property  (Sees.  140,  141.) 

Sec.  142  makes  it  obligatory  on  the  commission  to  call  an  an- 
nual "meeting  of  the  county  supervisors  of  assessment 
for  a  conference  upon  the  subject  of  taxation,  the  administration 
of  the  laws,  and  for  the  instruction  of  such  officers  in  their  du- 


HERTIG    ON    TAXATION.  207 

ties."  Each  attending  officer  shall  be  allowed  his  actual  ex- 
penses incurred  in  such  attendance,  to  be  approved  by  the  Tax 
Commission  and  paid  by  the  respective  county.  The  Origin  and 
working  of  such  conference  in  the  state  of  Indiana  have  already 
been  mentioned,  page  180. 

I  have  now  noticed,  and,  I  think,  sufficiently  discussed  every 
section  of  the  commissioners'  proposed  code  in  so  far  as  the  same 
bears  upon  the  proposed  more  effective  assessment  of  personal 
property.  It  is  true,  as  already  observed,  that  the  legislature 
of  Minnesota  refused  to  enact  this  code,  which  remains  therefore 
a  dead  and  buried  project  of  law.  But  tax  questions  are  settled 
neither  in  Minnesota,  nor,  with  possibly  one  or  two  exceptions, 
in  any  state  of  the  American  Union.  So  long  as  the  general 
property  tax  in  its  usual  .form  shall  remain  the  keystone  of  the 
revenue  arch,  so  long  will  there  be  complaints  of  its  injustice 
and  its  inefficiency,  and  so  long  perhaps  will  there  be  some  voices 
clamoring  for  a  more  drastic  code  than  that  on  the  statute-book 
of  Minnesota,  or  the  statute-books  of  other  states.  To  study 
and  criticise,  and,  where  proper,  to  ridicule,  the  proposed  and 
now  dead  code  of  the  late  tax  commission  of  Minnesota — is  to 
study,  criticise  and  ridicule  any  of  the  drastic  codes  now  else- 
where in  alleged  force  or  that  may  be  framed  and  laid  before 
future  legislatures  by  future  commissioners  or  individuals.  To 
graduate,  therefore,  in  knowledge  and  criticism  of  this,  our  pro- 
posed and  dead  code  of  the  year  1902,  is  to  graduate  in  knowledge 
and  criticism  of  any  of  the  drastic  codes.  The  state  of  Minne- 
sota has  expended  a  handsome  sum  in  printing  and  distributing 
twelve  thousand  copies  of  said  commission's  report  and  code ;  it 
would  be  a  pity  for  it  to  enter  the  limbo  of  waste  paper,  and 
there  lie  unnamed  and  forgotten,  when  it  can  be  made  to  serve  as 
a  more  solid  basis  for  a  campaign  of  education  than  any  dreamed 
of  by  its  framers.  Should  the  grateful  state  of  Minnesota  buy 
and  distribute  twelve  thousand  copies  of  this  book, — no  matter ; 
others  may  draw  the  right  inference. 

A  preacher  had  finished  a  sermon  to  the  general  satisfaction 
of  his  audience,  and  had  eloquently  praised  the  fashioning  hand 
of  Providence  as  shaping  all  things  well.  At  the  church  door 
lingered  a  hunchback,  and .  with  appropriate  p-esture  over  his 
shoulder  said  to  the  self-satisfied  preacher :  "And  you  say  Provi- 
dence shapes  all  things  well !"  "Friend,"  answered  the  preacher, 
"it  does  seem  to  me  that  for  a  hunchback  you  are  very  well 
shaped."  I  am  reminded  of  the  story  by  the  commission's  own 
defence  of  its  code.  See  report  everywhere  and  particularly  such 
passages  as  the  following :  "It  may  here  be  properly  said  that 
if  it  shall  be  proved  by  experience  under  the  bill  that  the  enforce- 


208  HERTIG    ON    TAXATION. 

ment  of  its  provisions  are  inadequate  to  produce  results  far  more 
satisfactory  than  any  the  state  has  ever  yet  known,  the  sooner 
the  taxation  of  many  classes  of  personal  property  is  abandoned 
the  better." — Report,  p.  15.  Very  well  said,  indeed.  If  this  is 
not  a  well-shaped  hunchback,  then  Providence  never  made  one. 


CHAPTER  XV. 


Proposed  code  of  the  tax  commission  is  opposed  by  various  interests — 
Bankers  have  their  hearings  and  score  against  it — Labor  organizations 
protest  likewise  vessel-owners,  grain-dealers,  warehousemen,  and  live- 
stock men — Farmers  lukewarm  or  divided — Bankers  charged  with 
underhand  work  in  procuring  petitions — After  two  weeks  devoted  to 
public  hearings  in  committee,  the  House  takes  up  the  code,  much 
amends  it,  and  kills  it  by  a  narrow  margin. 


It  was  apparent  at  the  outset  that  the  commission's 
code  must  suffer  death,  or  at  least  severe  mutilation.  It  had  ad- 
herents but  practically  no  "instructed"  friends.  Appearing  in 
print  only  a  few  days  before  the  legislature  met  to  pass  upon  it, 
this  formal  project  of  "reform"  taxation  had  little  time  to  make 
friends,  but,  as  the  sequel  showed,  abundant  time  to  make  ene- 
mies. Various  special  interests  at  once  took  alarm.  Bankers, 
in  particular,  felt  that  such  a  code,  if  enacted,  would  or  might 
work  untold  mischief.  Disingenuous  attempts,  not,  of  course, 
quite  so  open  as  I  put  them  in  my  own  blunt  words — 
were  made  by  friends  of  the  code  to  have  the  bankers 
think  that  their  customers  certainly  would  not,  and  that  they,  the 
bankers,  certainly  need  not,  list  deposits ;  that  paragraph  num- 
bered 2  of  sec.  32,  requiring  every  lister  (that  is  every  person 
required  to  make  out,  swear  to,  and  deliver,  a  list  to  the  assessor) 
to  "list  separately  and  in  the  name  of  his  principal  all  *  *  * 
classes  of  property  [expressly  including  moneys  and  credits] 
*  *  *  invested,  loaned  or  otherwise  controlled  by  him  as  the 
a^ent  or  attorney  or  banker" — would  not  be  construed  or 
acted  upon  in  such  a  way  as  to  bother  bankers ;  that  no  assessor, 
Traveled  on  neighbor  Thompson's  list  as  not  being  "full,  fair 
and  complete,"  would  dream  of  looking  for  Thompson's  banker, 
or  of  examining  "such  person  under  oath,"  as  required  by  section 
42  ;  that  certainly  no  assessor  would  put  to  any  banker  the  search- 
ing interrogatory  numbered  i  in  section  37,  required  by  said 
section  to  be  propounded  to  every  lister,  and  containing  amongst 
others  the  words,  "Are  you,  or  were  you  on  the  first  day  of  April 


210  HERTIG    ON    TAXATION. 

of  the  present  year  *  *  *  the  agent,  attorney  or  banker,  in- 
vesting, loaning,  or  otherwise  controlling,  the  money  or  other 
property  of  any  other  person ;"  that  in  any  event,  funds  deposited 
with  a  banker  became  in  law,  as  soon  as  so  deposited  his  own, 
subject  only  to  his  obligation  to  pay  the  same  sum  according  to 
the  terms  of  the  deposit;  that  in  the  law's  eye,  he  controls  no 
money  but  his  own,  unless  the  money  is  deposited  with  him  in 
an  unbroken  package  to  so  remain,  and  in  and  as  such  package 
to  be  returned  by  him;  that  therefore  he  may  say  no  to  all  in- 
terrogatories without  committing  perjury ;  and  that,  if  he  had  any 
fears  still  .remaining,  they  could  and  would  be  removed  .by  ap- 
propriate amendments  to  the  new  code  before  its  passage.  It  was 
gravely  printed  in  newspapers  that  as  the  result  of  a  conference 
at  which  the  new  code  was  officially  expounded  to  the  bankers 
shortly  before  the  legislature  met  they  felt  much  more  easy  in 
mind  than  they  felt  before.  Now  the  banker  may  not  always  be 
a  brilliant  man ;  like  the  conductor  that  put  Bill  Nye  off  the  train, 
he  may  not  be  able  to  "write  a  poem  to  save  his  measly  soul  from 
perdition;"  and  he  is,  moreo\er,  a  modest  man;  it  is  tolerably  re- 
cent history  that  Grover  Cleveland's  blatherskite  comptroller  of 
the  currency  easily  convinced  the  bankers  that  he  knew  more 
about  banking  than  they  did.  Still  the  banker  knows  a  thing  or 
two ;  and  he  knows  with  unerring  accuracy  that  if  depositors  be- 
lieve that  their  money,  on  to  speak  technically,  their  "credits"  are 
not  securely  hidden  in  his  hands,  from  the  assessor,  they  will 
withdraw  said  deposits,  and  hide  them  elsewhere.  All  "coons" 
look  alike  to  the  comic  songster  and  all  scares  look  alike  to  the 
serious  banker.  Besides,  the  banker  felt,  and  was  therein  un- 
questionably right,  that  he  pays  taxes  enough,  and  that  whoever 
escapes  a  just  share  of  personal  property  taxes,  he  certainly  does 
not.  Naturally,  therefore,  and  justly  the  banker  remained  an 
uncompromising  enemy  of  the  new  code.  He  was  heard  before 
the  tax  committee  of  the  House  before  the  bill  was  considered; 
and  the  objectionable  realities  and  possibilities  of  the  same  were 
so  apparent  as  well  from  the  banker's  as  from  the  depositor's  and 
from  every  common  sense  standpoint  that  the  banker  scored  an 
important  victory  even  before  it  was  apparent  that  the  new  code 
as  a  whole  would  be  hopelessly  defeated.  A  correct  newspaper 
chronicle  of  this  victory  gained  February  20,  runs  as  follows : 
"Mr.  W.  P.  Roberts,  [member  of  the  house  from  Minneapolis], 
introduced  an  important  amendment  to  section  32  of  the  law  by 
striking  out  [from  that  part  above  quoted]  the  words  'or  bank- 
ers', which  are  not  in  the  old  law.  This  is  the  provision  that  it 
was  feared  would  require  bankers  to  list  their  deposits  and  thus 
create  an  annual  panic.  The  amendment  was  adopted."  Other 


HERTIG     ON     TAXATION.  211 

amendments  adopted  before  the  new  code  was  voted  upon  as  a 
whole  and  finally  killed,  struck  out  entirely  its  drastic  provisions 
relating"  to  assessments,  and  substituted  in  their  place  provisions 
that  had  already  been  enacted  some  years  and  had  become 
blunted  and  comparatively  harmless  in  their  practical  working 
effect — Minnesota  statutes  that  nobody  dreams  of  listing  and 
assessing  up  to.- 

The  bankers,  even  if  they  had  had  no  misgivings  as  to  the 
effect  on  their  deposits  of  the  operation  of  a  law  like  the  pro- 
posed code, — had  grounds  enough  besides  to  enlist  them  in  warm 
opposition.  The  law,  as  it  stands  and  has  long  stood  in  Minne- 
sota, contemplates,  like  the  proposed  code,  assessments  at  the 
"true  cash  value"  of  the  property.  Bank  stock  cannot  be  hidden 
from  the  assessor's  view,  and  it  is  tolerably  easy  to  give  it  its 
"true  and  full  value."  Bankers,  as  a  rule  are  reluctant  to  admit 
even  to  an  assessor  that  their  stock  is  not  worth  at  least  par.  To 
give  that  stock,  however,  its  par  or  "book"  value  and  assess  it 
thereat,  would  not  only  work  upon  banks  the  hardship  of  paying 
an  excessive  tax,  but  would  set  forth  in  an  over-glaring  light 
the  injustice  of  such  tax  in  contrast  with  the  lighter  taxes  paid 
on  other  personal  property.  Therefore  in  nearly  all  the  Ameri- 
can states — all  in  fact  where  the  theory  of  law  is  that  the  assessed 
and  taxable  value  shall  be  the  "true  and  full  value" — incorporated 
banks,  though  all  pay  a  high  tax,  pay  nevertheless  only  a  com- 
promise tax.  Thus  in  Minnesota  for  some  years  last  past,  the 
state  board  of  equalization  has  flatly  disregarded  the  state  consti- 
tution and  statutes,  as  well  i-n  respect  to  other  values  as  in  respect 
to  the  values  of  bank  stocks — having  adopted  for  the  latter  the  fol- 
lowing arbitrary  rule :  "From  the  sum  of  the  capital  stock  sur- 
plus and  undivided  profits  of  each  bank  deduct  the  amount  of 
the  legally  authorized  investments  in  real  estate,  etc.,  and  take 
fifty  per  cent  of  the  remainder  as  the  assessable  value  of  the 
shares  of  the  bank's  stock.'1 — State  Auditors  Report  for  1889- 
1900,  p.  333- 

In  face  therefore  of  the  unusual  hoist  in  assessed  values  which 
the  new  code,  as  proposed,  would  elaborately  try  to  bring  about, 
the  bankers  while. robustly  disbelieving  that  any  great  all-round 
hoist  would  be  effected,  felt  that  they  would  be  the  easiest  target, 
and  feared  that  the  assessed  values  of  bank  shares,  for  awhile 
at  least,  might  be  marked  up  by  assessors,  county  auditors,  super- 
visors of  assessors,  county  boards  of  review,  and  finally,  as 
"great  panjandrum,"  by  the  tax  commission  itself — marked  up 
out  of  all  proportion  as  compared  with  other  markings  up.  This 
fear  of  itself  was  enough  to  make  them  intensely  hostile  to  the 
code  drafted  by  the  tax  commission.  Upham,  president  of  the 


1312  HERTIG    ON     TAXATION. 

First  National  Bank,  of  St.  Paul,  with  this  fear  in  mind,  said  in 
an  address  to  the  tax  committees  of  the  House  and  Senate,  that 
under  the  proposed  code  the  taxes  of  banks  would  he  increased. 
"This  condition  could  be  met,  however,  by  reducing  the  capital- 
ization, and  dividing-  [that  is,  paying  to  the  stockholders  in  extra 
dividends]  the  surplus,  which  naturally  would  have  a  tendency 
to  make  money  more  scarce  and  would  react  on  every  industry 
that  asked  for  credit."  He  rose  to  a  higher  plane  of  eloquence 
when  he  said  of  the  new  code,  which  had  then  been  launched 
on  its  brief  legislative  career  as  "House  File  Number  i":  "The 
true  title  of  this  Bill  would  read,  'To  discourage  enterprise  and 
industry  and  put  a  premium  on  perjury.'  '  S.  A.  Harris,  presi- 
dent of  the  National  Bank  of  Commerce,  of  Minneapolis,  in  ar- 
guing to  the  same  committees,  summed  up  with  judicial  discre- 
tion the  effect  of  the  bill,  if  it  should  be  enacted,  as  working  sim- 
ply an  unnecessary  disturbance  of  conditions:  "It  is  too 
drastic,"  he  said,  "and  drastic  measures  are  seldom  effective."  E. 
A.  Merrill,  president  of  the  Minnesota  Loan  and  Trust  Company, 
of  Minneapolis,  pointed  out  to  the  committees  the  obvious  and 
clinching  fact  that  the  bill,  if  enacted  and  enforced,  would  be  dis- 
astrous to  such  depositors  as  it  might  catch,  since  interest  paid  on 
deposits  was  seldom  more  and  often  less  than  the  rate  of  taxation 
on  assessed  values.  "Savings  banks,"  he  said,  "will  be  injured 
most.  They  pay  but  three  per  cent  interest.  Make  this  bill  an 
effective  law,  and  it  will  sweep  away  the  income  derived  from 
that  interest,  and  take  away  the  chief  object  in  saving.  If  the 
doubtful  policy  of  taxing  deposits  at  all  be  admitted,  it  should  be 
admitted  only  on  the  plan  of  levying  a  small  and  certain  tax. 
New  Hampshire,  for  instance,  successfully  taxes  savings  bank 
deposits  by  imposing  on  them  an  annual  tax  of  one-half  of  one 
per  cent."  Mr.  Merrill  further  argued  that  the  passage  of  the 
bill  would  cause  depositors  in  commercial  banks  to  transfer  their 
accounts  to  banks  outside  the  state,  thus  causing  the  calling  in  of 
loans,  scarcer  money  and  higher  rates  of  interest.  Its  passage, 
moreover,  would  be  disastrous  to  local  trust  companies ;  deposits 
now  held  for  estates  and  others  would  go  to  trust  companies  out- 
side the  state. 

A.  D.  Stephens,  of  'Crookston,  in  the  famous  Red  River  valley, 
is  a  bright  Scandinavian,  a  self-  made  man,  as  are  most  Minneso- 
tans,  and  a  banker  in  very  close  touch  with  the  farmers  of  the 
valley.  He  made  an  argument  before  the  tax  committees  criti- 
cising sharply  the  bill  as  a  whole  and  certain  of  its  minor  ad- 
ministrative features.  While  indorsing  the  arguments  of  his  city 
colleagues,  Mr.  Stephens  was  specially  earnest  and  emphatic  in 
affirming  that  the  code  drafted  by  the  tax  commission  would,  if 


HERTIG    ON    TAXATION.  213 

enacted,  work  hardship  upon  farmers  :  "This  measure  is  aimed 
at  tax-dodgers,  but  in  my  opinion  it  won't  reach  them.  It  will 
reach  the  farmers,  however,  for  their  property  is  visible.  They 
have  no  bonds  or  securities  to  hide.  Their  assessors  know  to  a 
dollar  what  their  land  is  worth.  In  my  district,  where  lands  have 
been  assessed  at  from  $5.00  to  $7.00  an  acre  the  assessment  will 
be  based  on  a  valuation  of  five  times  as  much.  A  blow  strik- 
ing the  farmers  directly  hits  the  country  banks.  We  cannot  pros- 
per unless  the  farmers  do."  It  will  be  seen  from  the  above  that 
Mr.  Stephens  thinks  the  average  "true  and  full  value"  of  lands  in 
the  Red  River  valley  is  from  $25.00  to  $35.00  per  acre,  and 
admits  that  their  present  assessed  is  only  about  one-fifth 
of  their  true  value.  This  may  be  compared  with  the  adverse  state- 
ment of  Judge  Wells  quoted  above,  p.  177,  that  on  the  whole, 
Minnesota  lands  are  not  under-assessed,  and  with  the  note,  p.  177, 
giving  some  evidence  that  there  is  in  fact  much  over-assessment 
of  real  estate  in  the  large  cities  of  Minnesota.  There  has  been  a 
great  rise  in  the  price  of  Red  River  lands  in  the  last  three  years. 
The  most  recent  assessment  of  lands  there — this  is  written  May 
2,  1902 — was  made  in  1900.  No  doubt  manv  sales  have  been 
made  recently  that  fully  sustain  the  figures  of  Mr.  Stephens. 
WHY  THE  LABORERS'  FURNITURE  SHOULD  BE  EXEMPT.— 
The  formal  representatives  of  labor  organizations  appeared  be- 
fore the  tax  committees  of  the  House  and  Senate,  and  made  good 
points'  against  certain  features  of  the  new  code.  One  provision  of 
the  same  that  seemed  wholly  without  friends  is  a  clause  in  section 
2,  making  the  taxable  personal  property  of  "each  individual  * 
*  actual  and  bona  fide  owner  thereof"  exempt  from  taxation  "to 
an  amount  not  exceeding  twenty-five  dollars  in  value."  The  con- 
stitution authorizes  the  legislature  to  so  exempt  to  an  amount  not 
exceeding  $?oo.oo  in  value.  The  exemption  heretofore  author- 
ized by  the  legislature  stands,  and  has  so  stood  for  years,  at 
$100.00.  The  commission,  in  cutting  it 'to  $25.00,  would  have 
cut  it  clean  out,  but  for  the  doubt  whether  "in  view  of  the  peculiar 
languaee  of  the  constitution  *  *  *  a  failure  to  provide  for  any 
exemption  would  conform  to  the  constitutional  requirement."  I 
give  the  commission's  reasons  for  the  cut  in  their  own  language : 
"The  consensus  of  opinion,  almost  without  dissent,  expressed  to 
the  commission,  verbally  and  by  letter,  is  that  the  present  exemp- 
tion of  one  hundred  dollars  is  a  fruitful  source  of  evasion. 

"One  of  the  marked  evils  incident  to  such  exemption  is  the 
practice  common  throughout  the  state  to  list  personal  property 
as  if  owned  by  the  several  members  of  the  same  family.  Stock 
on  the  farm  and  household  goods,  when  so  distributed  for  listing 
purposes  among  the  members  of  a  numerous  family,  too  frequently 


214  HERTIG  ON  TAXATION. 

are  successfully  kept  off  the  assessor's  books.  The  exemption  is 
undoubtedly  fraught  with  more  evil  than  good.  If  its  purpose 
was  ever  a  justification  for  its  existence  it  is  no  longer  so." — Re- 
port, p.  10. 

Later,  in  defending  the  commission's  work  before  the  tax  com- 
mittee of  the  House,  Commissioner  Childs,  suave  gentleman  and 
excellent  lawyer,  perpetrated  an  unconscious  pun  in  saying  that 
before  the  filing  of  the  commissioners'  report  "not  a  single  citi- 
zen was  seen  but  wanted  the  exemption  taken  off."  No  doubt 
"single  citizens,"  Bachelor  Jones,  Spinster  Smith,  Widow  Bedott 
and-  other  mateless  and  childless  citizens,  viewed  with  alarm  an 
existing  provision  that  enabled  neighbor  Thompson  to  give  in  his 
stock  and  household  goods  as  parceled  out  in  ownership  among 
the  numerous  members  of  Thompson's  family,  while  they,  the 
singly  taxed,  or  single  taxees,  had  no  such  way  to  bilk  the  as- 
sessor. It  did  not,  however  appear  that  General  Childs  meant  his 
defence  to  receive  so  strict  a  construction.  "The  commission,"  he 
continued,  "were  told  everywhere  that  the  exemption  was  used  as 
a  means  to  fraud."  With  what  seems  a  glaring  inconsistency, 
when  one  bears  in  mind  the  paragraph  I  have  just  quoted  from  p. 
10  of  the  commission's  report,  the  General  further  said:  "If  the 
commission  had  had  power  it  would  have  provided  for  an  exemp- 
tion of  $250.00  to  the  head  of  a  household  for  household  goods." 
Doubtless  General  Childs  meant  if  the  constitution  authorized  ex- 
emptions to  heads  of  families  only  and  not  to  others,  the  commis- 
sion would  have  favored  such  exemption  to  the  amount  of 
$250.00.  But  in  view  of  the  searching  oaths  and  multifarious  offi- 
cials provided  for  in  their  code,  and  the  commission's  proclaimed 
expected  efficiency  of  the  same,  it  seems  very  queer  that  the  com- 
mission in  said  paragraph  of  p.  10,  if  they  had  really  wanted  any 
exemption,  did  not  add  that  though  the  exemption  had  been  used 
freely  "as  a  means  to  fraud,"  yet  their  new  code  would  surely 
and  triumphantly  head  such  fraud  off,  and  that,  as  the  revenue 
derivable  from  the  taxation  o'f  personal  property  would  not  be 
seriously  diminished  by  allowing  the  exemption  of  $^oo.oo 
worth  of  the  same,  that  is,  up  to  full  constitutional  limit,  to  every 
bona  fide  owner,  they  would  recommend  such  exemption,  which, 
of  course,  under  the  constitution  would  and  must  apply  not  only 
to  heads  of  families  but  to  all  owners  of  personal  property.  The 
pointing  out  of  their  inconsistency,  though  of  little  importance 
in  itself,  points  farther  the  moral  that  if  three  such  bright  men 
ns  I11?:  late  tax  commissioners  of  Minnesota  got  so  easily  "balled 
up"  in  o^e  of  the  minor  tangles  of  the  subject,  there  is  the  greater 
n-'c-d  o^  n.  book  on  taxation  like  this  one  of  mine. 

Any  way  the  protest  of  the  labor  representatives  and  others 


HERTIG    ON     TAXATION.  215 

against  the  reduced  exemption  found  ready  and  practically  unani- 
mous favor.  Mr.  Gordon  O'Neill,  representing  the  Duluth  Fed- 
erated Trade  and  Labor  Assembly,  made  a  little  address  to  the 
tax  committee  of  the  House,  fairly  typical  of  what  his  colleagues 
generally  said  and  thought  of  the  proposed  gode.  "The  assess- 
ment of  property  at  full  valuation,"  said  he,  "will  increase  the 
taxes  of  the  working  classes  all  they  can  stand,  and  the  proposed 
cut  of  the  exemption  to  $25.00  worth  of  personal  property  will,  if 
adopted,  impose  an  additional  burden.  Besides  the  proposed 
method  of  taxing  vessels  and  grain  will  injure  the  laboring  peo- 
ple,of  Duluth,  as,  under  the  proposed  taxes,  vessel-owners  and 
grain  men  will  be  forced  to  leave  the  state,  or  do  business  on  a  re- 
duced scale.  The  provisions  for  taxing  money  in  banks  will  mean, 
the  withdrawal  of  deposits  on  assessment  day,  April  I,  and  will 
make  it  more  difficult  to  obtain  credit  from  them."  The  same  day, 
February  7,  I  urged  upon  the  committee  that  as  regards  the  ex- 
emption, the  labor  representatives  were  entirely  right ;  that  in- 
stead of  reducing  it,  the  legislature  ought  to  raise  it  to  the  full 
constitutional  limit  of  $200.00 ;  that  all  taxes  tend  to,  and  in  so 
far  as  they  do  not  confiscate,  do,  become  in  effect  income  taxes,  or 
take  a  certain  average  percentage  of  income  in  the  class  to  which 
each  tax-payer  belongs ;  that,  though  tax  students  vary  widely  in 
their  conclusions  regarding  certain  details  in  "the  incidence  of 
taxation,"  in  figuring  out  just  how  and  to  what  extent  certain 
taxes  and  parts  of  taxes  are  finally  paid  pro  rata  out  of  each  in- 
dividual purse,  yet  they  are  agreed  that  whoever  consumes  pays 
some  taxes  on  each  garment  that  he  wears  and  each  mouthful  that 
he  consumes ;  that  therefore  the  laborer  who  must  spend  the 
greater  part  of  his  income  and  often  the  whole  of  if  as  fast  as  he 
gets  it,  pays  in  the  inevitable  consumption  tax  included  in  every 
commodity  which  he  buys  a  tax  abundantly  heavy  for  persons  of 
his  means  without  pursuing  his  household  furniture  or  other  per- 
sonal property ;  that  as  to  frauds  practiced  by  listing  property  as 
belonging-  to  different  members  of  the  same  family,  and  which  the 
commission  in  their  report,  p.  io.  seem  to  imply  are  practised 
mostly  in  the  rural  districts,  these  should  not  be  invoked  to  war- 
want  an  act  of  injustice  to  others  ;  that  these  frauds,  if  not  of  too 
light  an  effect  on  the  revenues  to  deserve  serious  notice,  could  in 
the  main  be  checked,  even  though  the  exemption  could  not,  un- 
der the  present  constitution  be  limited  to  the  heads  of  families ; 
that  a  familiar  doctrine  of  jurisprudence  gives  to  the  legislature 
a  wide  choice  in  the  means  it  shall  take  to  uphold  a  constitutional 
right,  so  long  as  it  does  not  seek  absolutely  to  infringe  upon  or 
deny  such  right ;  that  this  familiar  doctrine  can  be  applied  to  the 
checking  of  frauds  relating  to  personal  property  exemption ;  and 


216  HERTIG  ON  TAXATION. 

that  the  legislature,  if  it  see  fit,  may  constitutionally  make  the  pos- 
session of  personal  property  by  one  family  in  one  dwelling 
or  by  one  family  in  one  farm  dwelling  and  on  lands 
worked  or  tilled  by  that  family — a  presumption  absolutely 
conclusive  on  the  assessor  and  other  tax  officials,  that  the  head  of 
the  family,  or  whoever  appears  to  be  such,  is  the  sole  owner  of 
said  property ;  only,  of  course,  the  legislature  must  give  some 
remedy  for  cases  where  the  presumption  declared  conclusive  does 
not  conform  to  the  real  facts  of  ownership, — that  is,  let  the  ag- 
grieved members  of  the  Thompson  family,  if  their  separate  in- 
dividual property  shall  have  been  wrongly  lumped  together  and 
assessed  to  the  paternal  Thompson,  apply  to  the  district  court  in 
due  form  of  law  according  to  such  details  of  procedure  and  such 
special  remedy  as  the  legislature  may  authorize  and  prescribe. 
Such  remedy  would  naturally  be  attended  with  some  trouble  and 
some  expense.  .Should  that  fact  occasionally  work  an  injustice,  it 
would  be  more  in  seeming  than  in  reality ;  it  would  only  be  go- 
ing back  to  the  ancient  way  of  looking  upon  the  Thompson  clan 
or  gens  as  one,  and  of  dealing  with  it  as  a  unit.  "We  may  be  sure 
that  old  man  Thompson  will  never  go  to  court  to  make  the  bluff 
that  certain  of  the  Thompson  property  assessed  to  him  has  been 
for  some  time  parceled  out  to,  and  between,  Tom,  Dick  and  Harry 
Thompson  and  their  buxom  sisters,  Sue,  Flora  and  Kate.  If  in 
those  rare  cases  when  the  Thompson  property  has  been  in  fact  so 
parceled  out,  and  the  Thompsons  remain  together,  a  co-operative 
commonwealth  in  miniature, — have  they  not  still  remaining  the 
individual  blessings  of  that  cohesive  affection  and  the  material  ad- 
vantages of  that  co-operation,  though  it  will  be  a  losing  venture 
commercially  speakine,  for  them  to  go  to  court,  and  release  their 
individual  properties  from  the  assessor's  aggregating  pinch  ?"  It 
may  be  added  here  that  the  House,  before  killing  off  the  tax  com- 
missions' code  amended  it  so  as  to  raise  personal  property  ex- 
emption to  the  full  constitutional  limit  of  $200.00.  The  yeas  were 
70  and  the  nays  31.  The  nays  were  all  Republican,  except  Hill- 
mond  (Democrat)  and  Mahood  (Populist).  Three  Democrats 
were  absent,  or  did  not  vote.  The  other  Democrats  and  all  the 
Populists,  except  the  two  mentioned,  voted  yea.  So  of  the  70 
yeas,  54  were  Republican,  and  16  Democratic  or  Populist. 

The  proposed  taxation  of  vessels  according  to  their  "true 
value  in  money"  met  deserved  opposition  at  the  very  outset. 
The  constitution  of  Minnesota  has  for  some  time  been  very  suc- 
cessfully evaded  as  regards  such  taxation.  In  1895  a  law  was 
passed  called  familiarly  the  vessel-tonnage  tax  law. — Laws,  1895, 
Ch.  224.  It  provides  for  the  annual  payment  of  "three  (3)  cents 
per  net  ton  of  the  registered  tonnage"  of  "any  steam  vessel 


HERTIG    ON     TAXATION.  217 

barge,  boat  or  other  water  craft  owned  within  this  state,  or  hail- 
ing from  any  port  thereof."  Such  payment  is  made  directly  into 
the  state  treasury  and  exempts  vessels  "from  all  further  taxa- 
tion either  state  or  municipal."  The  state  keeps  one-half  of  such 
payment  and  turns  over  to  the  county  in  which  the  "port  of 
hail"  of  the  respective  vessels  is  situate  the  other  half.  This 
law  in  fact  applies  only  to  St.  Louis  county  because  the  city  of 
Duluth  therein  is  practically  the  only  port  town  in  Minnesota. 
Though  the  law  is  clearly  unconstitutional,  it  is  acquiesced  in; 
and  it  is  acquiescence  that  gives  the  final  stamp  to  every  valid 
law.  In  1901,  the  tonnage  on  vessels,  yielded,  speaking  roundly, 
$10,000,  which  is  far  better  than  nothing. 

Governor  Van  Sant,  in  his  message  at  the  opening  of  the 
special  session,  fired  the  first  shot  against  the  commission's  pro- 
posed tax  on  shipping  with  excellent  aim  and  prudent  states- 
manship. We  may  allow  that  commerce  has  a  very  seamy  side 
at  times,  and  yet  take  no  umbrage  at  the  Governor's  unstinted 
praise  of  commerce.  Whatever  the  goal  to  which  we  tend,  how- 
ever grave  the  problems  which  the  eager  spirit  of 
commerce  will  surely  raise, — both  our  arrival  at  the  goal  and  our 
confronting  the  problems  are  equally  necessary  and  inevitable. 
So  long  therefore  as  wre  are  in  this  particular  stage  of  evolution, 
moving  inevitably  on  the  wheels  of  commerce,  let  there  be  no 
foolish  sprinkling  of  sand  on  the  axles ;  that,  at  least,  is  no  way 
to  regulate  nor  to  apply  brakes.  The  Governor  said  in  his  mes- 
sage: 

"The  proposed  code  provides  for  the  repeal  of  the  vessel-ton- 
nage tax.  In  this  respect  allow  me  to  make  the  following  sug- 
gestions : 

"Every  good  citizen  takes  pride  in  the  commercial  advance- 
ment of  his  state.  It  should  be  our  policy  to  foster  tendencies 
which  promise  greater  wealth  and  prosperity  to  any  section  of 
the  state.  Although  remote  geographically  from  the  seaboard, 
it  is  apparent,  that  this  state,  unless  prevented  by  legislation, 
may  soon  outstrip  many  of  her  rivals  in  the  magnitude  of  her 
shipping  interests.  The  registration  of  vessels  navigating  in- 
ternational waters  at  the  port  of  Duluth  indicates  that  it  is  a 
favorite  port.  When  we  bear  in  mind  that  interstate  tonnage  is 
beyond  the  taxing  power  of  the  state,  and  that  the  revenues  de- 
rived from  a  tonnage  tax  upon  vessels  must  always  greatly  ex- 
ceed what  would  arise  from  any  other  method  applied  to  that 
class  of  property,  it  is  apparent  that  the  subject  is  one  which 
calls  for  your  most  careful  consideration.  I  trust,  therefore  that 
you  will  be  able  to  enact  legislation  which,  while  not  in  violation 
of  the  constitution,  will  preserve  to  the  state  advantages  already 


218  HERTIG-   ON    TAXATION. 

gained,   and  present   no   impediment   to  the  growth   of  our  in- 
fluence over  navigation  upon  the  Great  Lakes." 

A  strong  delegation  from  Duluth  addressed  the  tax  commit- 
tees of  the  House  and  of  the  Senate.  They  pointed  out  with 
great  vigor  and  obvious  reason  the  folly  .of  imposing  a  tax  on 
ships  based  on  their  assessed  valuation  at  their  "full  and  true 
cash  value."  Ships  could  be  taxed  only  at  their  home  port,  as 
had  been  long  ago  decided  by  the  supreme  court  of  the  United 
States  (Hayes  v.  Steamship  Co.,  58  U.  S.  596),  and  vessel-owners 
engaged  in  the  lake  trade  could  easily  make  the  home  port  of 
their  vessels  some  port  not  in  Minnesota.  New  York  made  a 
pretence  of  taxing  vessels  registered  at  Buffalo  as  their  home 
port  and  engaged  in  the  lake  trade,  but  this  law  was  habitually 
and  by  common  consent  evaded,  and  its  non-observance  officially 
tolerated  and  winked  at  to  encourage  lake  vessels  to  register  at 
Buffalo.  Captain  Alexander  McDougall,  originator  of  the 
whaleback  type  of  vessel"  said  that  the  proposed  code,  if  enacted, 
would  destroy  Duluth's  prestige  as  a  shipping  center:  "Registra- 
tion at  Duluth  under  the  law  now  in  force,  [a  law,  which,  though 
unconstitutional,  as  aforesaid,  is  in  force  by  common  consent  | , 
costs  the  state  nothing,  has  grown  enormously  and  advertises 
Minnesota  throughout  the  world.  Taxes  on  vessels  as  proposed 
in  the  new  code  will,  unless  the  law  prescribing  them  shall  be 
come  a  dead  letter,  drive  the  registration  to  other  states." 

The  speaker  might  have  given  a  striking  illustration  of  the 
fact  that  a  foolish  tax  on  the  instruments  of  commerce  is  easily 
evaded  by  quoting  from  the  Report  of  the  United  States  Com- 
missioner of  Navigation  for  1894,  a  paragraph  cited  by  D.  A. 
Wells  in  his  Theory  and  Practice  of  Taxation,  p.  414:  "It  is  rel- 
atively an  easy  matter  for  the  owner  of  several  vessels  to  form  a 
partnership  with  the  resident  of  another  state,  in  which  low 
taxes  are  imposed  on  shipping,  and  by  allowing  the  vessels  to 
stand  in  the  name  of  such  partner  to  escape  the  endeavor  of  the 
law  to  tax  him  more  than  his  competitors  in  navigation  are 
taxed.  Thus,  some  years  since,  the  authorities  in  Chicago  de- 
cided to  tax  the  shipping  owned  at  that  port  on  its  full  insurable 
value  at  the  rate  fixed  for  municipal  taxes.  The  vessel  owners 
of  the  city,  in  self-defence  and  to  enable  them  to  continue  in 
business  against  competing  ports  were  compelled  to  make  nom- 
inal transfers  of  their  property,  and  thousands  of  tons  of  ship- 
ping doubtless  owned  in  Chicago,  appeared  on  the  records  of 
the  National  Bureau  of  Navigation  as  owned  in  other  states. 
Though  in  the  number  and  tonnage  of  its  entries  and  clearances 
Chicago  ranks  with  the  greatest  ports  of  the  maritime  world, 
yet  its  apparent  rank  as  a  ship-owning  port  is  insignificant."  In 


HERTIG    ON     TAXATION.  219 

plain  and  blunt  statement,  the  technical  home  port  of  vessels 
will  be  made  to  appear  that  within  reach  whose  taxes  are  lowest; 
and  whatever  may  be  the-  letter  of  their  respective  laws  on  tax- 
ation, we  know  that  in  the  commercial  rivalries  of  states,  tax 
officials  and  other  citizens,  as  at  Buffalo,  will  work  together  in 
countenancing  the  evasion  of  laws  taxing  shipping  to  induce  the 
owners  thereof  to  make  theirs  the  home  port  of  vessels.  How 
much  more  advantageous  from  every  standpoint  to  impose  a 
moderate  and  certain  tax  on  the  tonnage  or  on  the  earnings  of 
ships  in  lieu  of  all  other  taxes. 

The  most  important,  perhaps,  of  all  the  special  interests  that 
made  protest  and  argument  before  the  tax  committees  against 
the  tax  commission's  code — was  that  of  the  grain  men.  I  am 
bound  to  say  that  they  were  thoroughly  and  indisputably  right 
as  regards  their  main  position  on  the  tax  question ;  and  that  po- 
sition is  summed  up  in  these  words:  All  grain  '-in  transit" 
should  be  exempt  from  taxation;  and  all  grain  stored  in  eleva- 
tors, whether  billed  or  about  to  be  billed  out  in  interstate  transit, 
or  held  for  use  in  the  state,  should  in  the  eye  of  the  law  be  con- 
side'red  "in  transit."  To  make  this  proposition  the  law  of  the 
state,  is,  they  argued,  the  only  way  in  which  Minnesota  can  main- 
tain her  supremacy  as  a  grain  market  in  competition  with  neigh- 
boring states.  "The  Duluth  delegation  was  specially  interested 
in  having  grain  in  interstate  transit  exempt.  The  proposed  tax 
meant  that  the  business  would  go  to  Superior.  Duluth  was  now 
the  outlet  of  a  funnel  that  comprised  the  entire  Northwest.  A 
board  of  trade  had  been  built  up  which  gave  the  farmer  a  mar- 
ket for  his  grain,  and  grades  had  been  established  recognized 
the  world  over.  But  if  this  tax  bill  prevailed,  the  business  would 
be  done  in  Wisconsin  or  other  neighboring  states." — Pioneer 
Press  Report,  Feb.  8,  1902.  It  is  stated  by  the  Duluth  dele- 
gation that  contracts  for  building  new  elevators  were  held  in 
suspense  pending  legislative  action  on  the  new  tax  bill.  Captain 
McDougall,  above  quoted  on  the  taxation  of  shipping,  was  one 
of  the  speakers  for  the  Duluth  grain  delegation.  Other  Duluth 
speakers  were  Messrs.  M.  J.  Phillips,  A.  D.  Thompson,  Ward, 
Ames,  and  George  C.  Spencer. 

The  Minneapolis  gram  men,  for  whom  spoke  C.  M.  Harring- 
ton, of  the  Van  Dusen-Harrington  Company,  and  Mr.  L.  Loring, 
argued  that  the  passage  of  the  tax  bill  would  destroy 
the  supremacy  of  Minneapolis  as  the  primary  wheat  market  of 
the  world;  that  the  mills  there  could  not  operate  successfully 
without  there  were  elevators  in  constant  operation  and  of  great 
storage  capacity;  that  the  existence  and  use  of  such  storage  ca- 
pacity are  absolutely  essential,  vitally  necessary,  to  make  a 


220  HERTIG    ON    TAXATION. 

strong  market  for  wheat;  that  Minnesota  alone  cannot  furnish 
the  mills  with  the  wheat  they  need,  and  that  they  must  have  all 
the  facilities  for  a  strong  market,  and  that  market  itself,  to  at- 
tract their  wheat  from  other  states  in  competition  with  the  en- 
tire world;  that  without  the  great  storage  capacity  of  the  Min- 
neapolis elevators,  wheat  needed  there  would  be  sent  to  the  East. 
and  would  never  return;  that  the  proposed  code  would  destroy 
or  cripple  the  elevators,  and  the  mills  would  eventually  have  to 
shut  down,  in  which  case  the  farmer  would  get  only  the  shipping 
price  for  his  grain;  that  substantially  all  the  capital  of  the  ele- 
vator companies  is  in  their  plants,  and  is  already  taxed  as  real 
estate;  that  they  buy  their  wheat  with  borrowed  capital,  which  is 
also  subject  to  a  tax  under  the  name  of  "credits." 

Readers  will  note  that  while  I  heartily  concur  in  the  main 
proposition  as  advanced  above  prior  to  giving  the  substance  of 
the  arguments  made  by  the  grain  men,  neither  the  arguments  as 
such  nor  the  contingent  prophecies  therewith  interwoven  are 
mine.  I  believe  in  a  moderate  special  tax  on  elevators,  as  set 
forth  above,  pp.  193-194.  I  believe  also  that  if  the  foolish,  drastic 
provisions  of  the  proposed  code  regarding  grain  and  other  prod- 
uce, had  been  enacted,  the  disastrous  consequences  predicted  by 
the  elevator  men  would  have  materialized  merely  in  much  annoy- 
ance and  some  loss  to  everybody  interested  in  handling  or  rais- 
ing grain,  but  in  the  end  would  have  been  largely  canceled  out 
by  systematic  evasion  and  open  violation  of  the  law;  and  I  don't 
believe  in  the  legislative  creation  of  schools  for  perjury  or  any 
form  of  law-breaking.  And  finally,  I  will  use  to  some  purpose 
the  words  of  clause  numbered  12  of  the  commission's  dictionary 
of  taxable'  personal  property:  I  believe  in  the  non-taxation  of 
"all  produce,  seeds  and  grain  on  hand  within  this  state,  whether 
in  granary,  mill,  warehouse,  or  otherwise,  or  in  transit."  This 
belief,  carried  into  law,  would  exempt  the  farmer's  seed  grain 
or  any  grain  or  other  produce  that  he  may  have  on  hand  at  as- 
sessment day.  I  would,  however,  couple  this  exemption  with 
the  limitation  that  grains  held  over  from  any  harvest  except  the 
one  last  preceding  assessment  day  should  be  taxable.  Thus,  as 
on  assessment  day  last  year's  grain  is  generally  more  than  six 
months  old,  and  would  not  be  assessable  under  my  plan,  until 
the  coming  of  another  assessment  day,  the  farmer  could  hold 
his  grain  free  from  taxation,  either  for  speculation,  or  other- 
wise, at  least  a  year  and  a  half  after  harvesting  it.  Of  course, 
there  is  practically  no  year-and-a-half-old  grain  in  elevators,  and 
not  much  in  farmers'  granaries;  but  it  would  work  no  hardship 
for  it  to  be  taxed  wherever  found.  This  plan  gives  practical 
shape  to  the  common-sense  principle  that  the  land  itself  being 


HERTIG    ON     TAXATION.  221 

taxed,  and  bearing,  as  it  does,  the  greater  burdens  of  taxation, 
the  land's  income  is  entitled  to  a  reasonable  exemption.  Let  us 
suppose  that  such  an  exemption,  if  given  by  the  law,  would  en- 
courage the  well-to-do  farmer  of  any  locality  and  even  well-to-do 
townsmen  to  use  their  moneys,  "credits"  and  their  credit  to  buy 
and  hold  wheat  harvested  in  1902 — hold  it  past  assessment  day 
in  the  spring  of  1903,  with  the  intention  of  taking  chances  on 
the  harvest  of  1903  turning  out  poorly,  or  of  taking  chances  on 
any  other  contingent  event  that  would  raise  prices,  if  such  event 
should  take  place.  It  is  plain  that  the  first  effect  of  such  a  move- 
ment would  be  a  brisker  market  and  better  prices.  It  is  a  mat- 
ter of  common  observation  that  now  in  the  spring  local  stocks 
of  wheat  in  country  elevators  and  to  a  certain  extent  in  country 
granaries,  are  rushed  to  market  before  assessment  day.  The 
buyer  knows  the  reason  of  this  as  well  as  the  seller.  Unless  the 
buyer  is  reasonably  sure  that  he  can  evade  the  law  as  it  now 
stands,  and  which,  if  it  were  enforced,  would  tax  all  wheat  in 
Minnesota  on  assessment  day,  at  a  rate  that  would  make  the  tax 
amount  to  about  two  cents  per  bushel — unless,  I  repeat,  the 
buyer  is  reasonably  sure  that  he  can  evade  that  tax,  he  is  in- 
disputably sure  to  give  about  two  cents  a  bushel  less  for  the  wheat 
so  rushed  to  market  in  the  spring  than  he  otherwise  would.  If 
that  tax  shall  be  collected,  he  who  rushes  to  market  before  as- 
sessment day  as  surely  pays  it,  as  if  he  had  to  go  and  procure, 
before  selling,  a  license  to  sell,  and  had  to  pay  for  such  license 
two  cents  per  bushel. 

In  public  hearings  before  the  tax  committees  of  the  House 
and  Senate,  the  first  two  weeks  of  the  special  session  were  con- 
sumed. Some  routine  legislative  matters  received  attention; 
some  bills  of  a  "curative"  nature  made  long  strides  toward  a 
place  in  the  statute  book;  but  in  the  main,  the  special  session 
then  and  thereafter  confined  itself  to  tax  matters.  Opposition 
to  the  proposed  code  was  expressed  by  nearly  all  the  speakers 
at  these  hearings.  Two  of  the  tax  commissioners,  Ex-Attorney- 
General  Childs,  as  already  mentioned,  and  Ex-Lieutenant  Gov- 
ernor Gideon  S.  Ives  made  arguments  in  favor  of  the  bill.  Gov- 
ernor Ives,  perhaps,  did  not  mean  to  be  cynical;  but  his  argu- 
ment in  favor  of  the  drastic  personal-property-tax  provisions  of 
the  code  he  had  helped  to  frame  is  in  the  cynic's  vein,  or  looks 
that  way,  if  one  slightly  rearranges  his  propositions.  Minneso- 
ta's present  tax  laws,  he  argued,  have  yielded  in  the  taxation  of 
personal  property  a  scant  harvest  of  revenue  and  a  bounteous 
harvest  of  misrepresentation  and  lying" ; — why  this  outcry  over 
the  compulsory  virtue  of  our  new  code  ?  Is  lying  then  so  excel- 
lent and  virtue  so  poor  a  thing,  that  Minnesota  taxpayers,  who 


222  HERTIG    ON     TAXATION. 

alas  are  tax-dodgers  as  well,  should  now  complain  because  we 
propose  that  the  state  shall  become  in  very  truth  [what  some 
cheerful  philosophers  have  called  "organized  morality"]  what 
she  should  always  be, — effective  to  prevent  fraudulent  decep- 
tion? 

While  the  present  tax-laws  of  the  state,  those  which  have 
yielded  the  crop-  of  misrepresentation  of  which  Governor  Ives 
spoke,  provide  that  every  person  having  taxable  property  of  his 
own,  or  required  to  list  as  holder  of  same  for  another,  "shall 
make  out  and  deliver  to  the  assessor,  when  required,  a  state- 
ment verified  by  his  oath,  of  all  the  personal  property  in  his  pos- 
session or  under  his  control"  (Code  of  1894,  sec.  1523),  and  fur- 
ther provide  that  whenever  the  assessor  thinks  such  lister  "has 
not  made  a  full,  fair  and  complete  list  of  such  property,  he  may 
examine  such  person  under  oath,"  etc.  (Code  of  1894,  sec.  1525.), 
— yet  there  is  no  penalty  of  any  kind  for  refusal  to  so  swear,  un- 
less it  be  regarded  as  a  penalty  that  the  assessor  "if  such  person 
shall  refuse  to  answer  under  oath,  *  *  *  may  list  the  property 
*  *  *  according  to  his  best  judgment  and  information;"  and 
hence,  assessors  always  being  modest  in  the  use  of  their  "best 
judgment  and  information,"  all  swearing  in  tax  matters,  as  the 
Minnesota  laws  now  stand,  is  wholly  gratuitous  and  unnecessary. 
Hence  also  such  deception  and  misrepresentation  as  are  prac- 
tised by  the  lister  may  be  classed  in  bulk  as  plain  lying  and  not 
perjury.  Hence  I  summed  up  in  a  subsequent  speech  before  the 
tax  committee  of  the  House,  Gov.  Ives'  argument  not  according 
to  its  wor%ds  but  according  to  its  pith,  as  follows:  We  have  now 
got  you  trained  to  be  experts  in  plain  lying,  and  you  seem  to  like 
it  ; — is  it,  then,  such  a  great  matter  if  we  lead  you  a  step  further 
and  make  you  experts  in  complex  perjury? 

The  general  farming  interests  barely  appeared  at  all  before 
the  committees  either  to  protest  against  or  to  favor  the  bill. 
The  live  stock  men,  however,  protested  vigorously  against  its 
passage.  Many  of  them,  it  was  urged,  were  earnestly  striving  to 
improve  horses,  cattle  and  sheep  by  procuring  from  other  states 
and  'from  across  the  water,  at  great  expense,  blooded  sires  and 
dams  for  their  particular  localities.  There  was  great  risk  in  this, 
because  it  was  always  uncertain  how  any  animal  would  turn  out ; 
and  it  was  but  fair,  ran  the  conclusion,  that  the  assessor  should 
not  assess  high-priced  brood  animals  at  their  supposed  full  cash 
value.  Improved  breeds  should  be  encouraged,  and  the  state 
by  non-interference  should  be  the  chief  encourager.  The  rev- 
enue to  the  taxing  power  in  these  special  cases  would  be  trifling, 
but  could  easily  be  grievous  to  the  individual.  Even  under  the 
present  law  assessors  were  occasionally  unduly  anxious  to  mark 


HERTIG    ON    TAXATION.  223 

up  a  high-priced  stallion  or  bull,  but  the  local  boards  of  equal- 
ization would  generally  do  nearly  the  right  thing  and  keep  the 
assessment  from  remaining  excessively  high. 

Petitions  purporting  to  be  signed  by  farmers  and  opposing 
the  bill  were  numerously  received.  The  rare  petitions  purport- 
ing to  be  from  the  same  or  any  class  and  favoring  the  bill,  made 
a  weak  showing  in  comparison  with  the  numerous  opposing 
ones.  "The  first  petition  in  favor  of  the  bill  which  was  received 
from  Fillmore  county  yesterday,  aroused  much  interest,  but  it 
looks  very  lonesome  alongside  of  the  increasing  pile  of  protests 
against  the  measure." — BINGHAM,  in  Duluth  Evening  Herald, 
Feb.  15,  1902.  For  the  rest,  petitions  at  best  are  rather  weak  ev- 
idence of  the  sentiment  which  they  profess.  A  pair  of  sturdy 
Scandinavians,  A.  D.  Stephens,  the  Crookston  banker  already 
mentioned,  and  J.  F.  Jacobson,  member  from  Lac  qui  Parle 
county,  had  a  vehement  wrangle  on  this  point  When  Greek 
meets  Greek — Stephens  insisted  that  the  farmers  were  opposed 
to  the  bill;  Jacobson  accused  the  bankers  of  making  it  appear 
that  farmers  opposed  the  bill,  when  in  reality  they  did  not. 

"We  have  seen  these  petitions  from  farmers,  asking  the  sanie 
action  which  you  bankers  are  asking/'  said  Jacobson,  "and  we 
all  know  how  the  farmers  were  induced  to  sign  them.  Anybody 
can  get  signers  to  petitions." 

"It  is  true,"  replied  the  banker,  "that  people  who  are  luke- 
warm or  neutral  do  sometimes  sign  petitions  to  accommodate 
the  man  who  asks  them.  But  you  must  have  a  mighty  poor 
opinion  of  the  friends  of  this  code,  if  it  has  any,  if  you  think  that 
they  will  write  themselves  down  on  the  other  side  the  moment 
they  are  asked.  I  know  lots  of  farmers  who  wouldn't  sign  a 
petition  in  favor  of  this  bill  for  anybody.  Fact  is  the  bill's'so  bad 
that  it  has  aroused  lots  of  people  to  work  against  it:  Why  don't 
it  inspire  somebody  to  pull  for  it?  Here's  ten  dollars  that  says 
no  underhanded  methods  have  been  used  to  get  petitions  signed." 

"That's  easy  money,"  rejoined  Jacobson.  "Don't  you  know 
the  bankers'  association  has  sent  out  letters  calling  for  smooth 
work?" 

"If  there  are  such  letters,"  sur-rejoined  Stephens,  "they  only 
stand  for  the  honest  belief  of  the  bankers  that  such  legislation 
as  the  tax  commission  recommends  would  be  detrimental  to  the 
interests  of  the  farmer  as  well  as  the  banker.  The  same  boat 
carries  us  both.  Once  more  this  is  my  indorser,"  and  he 
smoothed  out  the  new  ten-dollar  bill. 

This  colloquy  took  place  in  the  senate  chamber ;  and  the  dis- 
putants had  become  the  center  of  a  sizeable  group.  Jacobson 
now  took  advantage  of  the  "psychological  moment"  to  flash 


224  HERTIG    ON    TAXATION. 

forth  a  letter  written  or  printed  on  stationery  of  the  Minnesota 
Bankers'  Association,  and  read  it  out  as  follows: 

"I  inclose  you  herewith  a  petition  recommending  that  action 
on  the  proposed  tax  bill  be  deferred  until  the  constitution  is  so 
amended  that  a  proper  law  can  be  passed.  The  petition  is  in- 
tended to  be  a  personal  one  to  your  local  representatives  in  the 
legislature. 

"I  wish  you  would  insert  the  proper  names  at  the  head  of 
the  petition  and  obtain  as  many  signatures  as  you  can  of  the 
men  in  your  locality  who  are  opposed  to  the  proposed  tax  law 
prepared  by  the  commission.  Additional  plain  sheets  can  be 
attached  for  more  names. 

"Please  do  the  work  as  rapidly  and  as  discreetly  as  possible, 
avoiding  the  stirring  up  of  opposition,  and  endeavor  to  obtain  the 
names  of  men  who  have  the  most  influence  with  your  repre- 
sentatives. 

"Send  the  petition,  when- signed,  to  your  delegates  in  St.  Paul. 
"Yours  respectfully, 

"Joseph  Chapman,  Jr., 

"Secretary." 

"Be  discreet!"  shrieked  Jacobson;  "avoid  the  stirring  up  of 
opposition.  That's  how  you  got  your  petitions  from  farmers. 
But  you  didn't  show  them  your  secretary's  letters;  you  had  an- 
other kind  for  show;"  and  Jacobson  produced  another  letter  to 
go  with  the  one  he  had  read,  and  the  blank  petition. 

"We  have  all  heard  of  men,"  said  Stephens,  "who  express  a 
preference  for  hell  rather  than  meet  certain  of  their  neighbors  in 
heaven.  Perhaps  the  secretary  of  the  Bankers'  Association  had 
some  such  fact  in  mind,  and  used  accordingly  what  I  believe  to 
have  been  unnecessary  caution  for  fear  some  farmers  seeing 
themselves  and  bankers  going  the  same  way  would  think  it  best 
to  face  about.  And  I'll  allow  that  such  work,  .though  neither 
harmful  nor  in  fact  misleading,  gets  into  the  underhanded  class 
by  a  close  squeeze.  There's  your  money." 

The  "gentleman  from  Lac  qui  Parle''  waved  the  bill  aside. 
Said  he:  "The  only  bill  next  my  heart  is  the  tax  bill.  I  never  bet, 
and  besides,  I  don't  need  the  money.  Keep  it  to  pay  taxes 
with !" 

A  farmer  from  the  Red  River  Valley,  named Cart- 
wright,  appeared  before  the  committee  in  his  working 
clothes,  and  spoke  against  the  bill,  saying  that  it  had  been  talked 
over  by  farmers  in  his  locality  who  had  a  debating  club,  and 
that  they  were  opposed  to  the  bill.  Questioned  pointedly  by  J. 
A.  Peterson  of  Minneapolis,  Mr.  Cartwright  replied  that  he  was 
no  lawyer,  only  a  plain  blunt  farmer,  and  that  he  could  not  go 


HERTIG    ON    TAXATION.  225 

over  the  bill  point  by  point,  like  a  lawyer,  and  pull  it  to  pieces; 
but  that  the  farmers  where  he  came  from  did  not  like  it.  When- 
ever a  man  does  the  unexpected,  people  are  apt  to  cast  about 
curiously  to  look  for  hidden  motives.  That  Stephens  should  have 
come  from  the  Valley  to  voice  the  feeling  of  country  bankers 
seemed  genuine  and  natural;  that  Cartwright  should  have  come 
from  the  Valley  to  speak  for  the  farmers  seemed  to  require  a 
different  explanation; — at  least  the  friends  of  the  bill  thought 
so,  and  whispered  that  special  inducements  had  made  him  come. 
I  do  not  feel  called  upon  to  attempt  the  solution  of  every  ques- 
tion mentioned  in  these  pages! 

Toward  the  close  of  the  public  hearings,  a  natural  stump 
speaker  and  ready  humorist  appeared  before  the  tax  committee 
of  the  House.  He  spoke  in  favor  of  the  bill,  and  brought  out  the 
oldest  and  most  typical  point  which  prods  the  farmer  to  discon- 
tent with  the  workings  of  tax  laws  in  the  American  states, — the 
farmer  is  caught,  while  the  Village  Hog,  known  to  have  money 
on  hand  for  a  hard  bargain  or  to  lend  at  usury,  gets  off  with 
nominal  taxes  on  his  moneys  and  credits.  I  give  the  piquant  re- 
port of  him  and  his  speech  made  by  Stillman  H.  Bingham  in  the 
Dul nth  Evening  Herald  of  February  I5th.  I  do  not  vouch  for 
Bingham's  account  of  how  the  speaker  came  to  take  the  floor, 
but  only  for  the  substantial  accuracy  of  Bingham's  report  of  the 
speech:  "Yesterday  J.  F.  Jacobson  and  J.  A.  Peterson  hunted 
out  a  real  live  farmer  and  got  him  to  talk  on  the  bill.  His  name 
is  Warren  Wakefield,  and  he  lives  in  Long  Lake,  Hennepin 
county,  a  short  distance  outside  of  Minneapolis.  He  is  really 
a  farmer,  and  he  is  also  justice  of  the  peace  in  his  village.  To 
prove  that  he  is  a  farmer  he  wears  whiskers,  and  came  into  the 
legislative  halls  dressed  just  as  though,  like  Cincinnatus,  he  had 
been  called  away  from  the  fields  to  the  capitol.  He  made  a 
speech  and  he  favored  the  tax  bill.  He  said  that  in  the  country 
nothing  escapes  the  assessor.  Everybody  knows  just  what  ev- 
erybody else  owns,  and  there  is  no  chance  of  getting  out  of  pay- 
ing taxes  on  it. 

'  'But  my  neighbor  in  the  town,'  said  Wakefield,  farmer  and 
justice  of  the  peace,  kowns  $30,000  [and  will  even  admit  privately 
that  he's  got  it]  which  he  loans  out  on  mortgages.  He  does 
not — may  I  say  damn?  [here  the  speaker  had  the  look  of  one 
sure  of  his  point]  I  will  say  damn — he  does  not  pay  a  damn  cent 
of  taxes  on  his  money!'  [Laughter  and  applause.] 

"Air.  Wakefield  said  that  the  farmers  had  absolute  confidence 
in  the  legislature,  and  he  said  further  that  in  the  past  the  farmer 
had  been  paying  more  than  his  share  of  taxes,  and  he  would  be 
in  favor  of  any  bill  that  would  equalize  things.  The  legislature 


226  HERTIG    ON     TAXATION. 

might  be  sure  it  had  the  farmers  back  of  it,  and  it  could  go  ahead 
and  pass  the  tax  bill,  just  as  it  came  from  the  commission,  with- 
out changing  it." 

Of  the  addresses  made  on  the  hearings  before  committees, 
none  attracted  quite  so  much  attention  as  that  of  Lawson  Purdy, 
on  February  nth.  Purdy  is  secretary  of  the  New  York  Tax 
Reform  League,  and  is  a  very  "bright"  young  man.  The  Houst 
committee  on  taxation  met  with  the  like  Senate  committee  to 
hear  him;  and  as  the  session  and  the  speech  had  been  well  men- 
tioned beforehand  in  the  public  press,  every  seat  in  the  House 
chamber  and  its  gallery  was  occupied.  Purdy's  limitations  had 
been  studiously  kept  in  the  background;  probably  only  a  small 
portion  of  his  audience  knew  that  he  is  a  single-taxer,  must 
therefore  be  an  out-and-out  free  trader,  must  look  with  more 
or  less  contempt  on  every  plan  of  taxing  personal  property, 
must,  on  any  occasion  calling  for  an  address  to  such  an  audi- 
ence, be  "nothing  if  not  critical."*  The  follies  of  the  general- 
property  taxer  are  nuts  for  the  single-taxer;  and  such  is  the 
construction  of  human  nature,  such  its  inseparable  aversion  to 
anything  like  a  pure  form  of  the  single  tax,  that  probably  no  one 
will  ever  have  an  opportunity  to  cast  at  the  single-taxer  the  rot- 
ten fruits  of  single  tax  laws.  It  is  delicious  to  pose  as  a  political 
lord  of  the  earth  on  such  terms  as  guarantee  permanent  lord- 
ship of  the  air !  A  single-taxer  may  be  compared  to  a  physician 
whose  particular  unshakable  article  of  belief  is  that  he  has  a 
sovereign  specific  remedy — sure  cure,  whatever  the  diagnosis. 
He  has  no  possibility  of  growth  in  the  matter  of  remedies ;  there 
is  his  sovereign  specific,  one  and  invincible,  the  same,  yesterday, 
to-day  and  forever.  Human  nature  rebels  instinctively  against  a 
course  that  insures  mental  paralysis.  We  may  imagine,  there- 
fore, the  physician  of  the  sovereign  balm  saving  himself  in  such 
case  by  whetting  his  faculties  on  diagnosis,  developing  every 
sense  to  detect  obscure  and  other  symptoms  that  make  a  patient 
sick  enough  to  give  the  sovereign  specific  a  chance  to  work !  So 
the  single-taxer  has  developed  a  marvelous  keen  scent  to  find 
out  the  woes  born  of  the  general  property  tax.  He  has  em- 
braced the  one  chance  open  to  keep  his  faculties  on  edge!  Thus 
Thomas  G.  Shearman's  work,  Natural  Taxation  (New  York, 
1895)  contains  a  delightfully  keen  criticism  on  the  taxation  of 


*In  justice  to  Purdy  it  should  be  said  that  the  printed  version  of  his 
speech  contains  these  words,  "I  wish  to  be  understood  as  not  in  favor  of 
taxing  personal  property,  directly  or  indirectly."  Though  I  followed  the 
speech,  as  spoken,  with  interest,  and  as  I  thought  sufficient  attention,  I 
did  not  mark  these  words,  and  unaware,  at  the  time,  of  his  antecedents, 
heard  him  through  without  thinking  of  single  tax. 


HERTIG    ON     TAXATION.  227 

personal  property,  entirely  applicable  to  such  taxation  as  prac- 
ticed in  nearly  all  the  American  states.  Admitting  the  justice  ot 
such  criticism  within  the  limitation  stated,  it  does  riot  follow 
as  a  consequence  thereof  that  Shearman's  proposition  "One  Tax 
Enough,"  put  forth  in  his  chapter  X.,  is  established ;  nor,  if  such 
tax,  levied  on  the  ground  rent  of  real  estate,  should  produce  suf- 
ficient revenue  without  confiscating  the  land,  does  it  follow  that 
such  single  tax  should  be  adopted.  The  single-taxer  would 
be  met  on  the  threshold  by  what  Shearman  concedes  to  be  "the 
universal  practice  of  assessors  to  rate  vacant  land  held  for  spec- 
ulative purposes,  much  lower  than  occupied  land  having  precise- 
ly similar  market  value;"  and  this  "universal  practice"  would 
go  far  toward  bowling  over  the  single-taxer  in  his  dearest  and 
fondest  expectation — that  vacant  lands  at  least  would  be  con- 
fiscated under  the  operation  of  the  single  tax,  or  speedily  pass  by 
leaps  and  bounds  into  improved  lands.  But  I  return  to  Purdy's 
speech.  Sparkling  with  instructive  criticism,  based  on  facts  fa- 
miliar to  all  students  of  taxation,  its  counsel  to  Minnesota- was 
to  adopt  the  constitutional  amendments  proposed  by  the  com- 
mission (of  which  amendments  more  anon),  and  to  offer  them 
unweighted  with  any  code  or  "purpose  of  making  any  specific 
changes"  in  the  general  body  of  the  tax  laws.  "The  amend- 
ments in  themselves,"  he  said,  "are  necessary  and  so  good  that 
their  adoption  should  not  be  imperiled  by  being  even  in  thought, 
bound  up  with  any  particular  tax  system.  The  amendments 
should  receive  the  votes  of  all  without  regard  to  their  views  as 
to  what  system  the  legislature  should  see  fit  to  adopt  when  it  has 
the  power."  The  commission's  proposed  amendments  to  .the 
constitution,  as  we  shall  see  later  would  give  to  the  legis- 
lature practically  a  free  hand  to  deal  with  taxation. 

Purdy  further  advised  the  legislature  to  continue  in  office 
the  members  of  the  tax  commission,  "and  add  two  business  men 
to  increase  its  representative-  character.7'  He  could  hardly  do 
less  than  praise  the  commission  for  recommending  local  option 
in  taxation,  since  the  commission  seem  to  have  borrowed  from 
him,  or  from  others  like-minded,  the  local-option  sentiment  ex- 
pressed on  p.  55  of  the  commission's  report  and  approvingly 
quoted  by  Purdy:  "It  should  be  left  to  a  large  extent  to  the 
political  subdivisions  of  the  state  to  determine  for  themselves 
the  objects  for  which  revenue  is  to  be  raised  therein  and  the 
subjects  from  which  it  is  to  be  exacted."  Single-taxers  now 
favor  local  option  in  taxation  largely  for  the  reason  that  they 
have  begun  to  recognize  the  very  stubborn  and  very  patent  fact 
that  no  state  as  a  whole  will  adopt  the  single  tax.  They  hope, 
therefore,  to  divide  and  conquer :  If  they  cannot  convince  a 


228  HERTIG  ON  TAXATION. 

state  of  the  powerful  searching  and  healing  properties  of  their 
sovereign  specific,  perhaps  they  can  contrne  to  induce  some 
taxing  district  within  a  state  to  show  to  a  skeptical  world  by 
conclusive  experiment  the  wonders  which  they  hope — if  any 
single-taxer  can  be  found  to  express  his  faith  with  so  weak  a 
word  as  hope ! — the  single-tax  medicine  will  work  upon  the  sores 
and  blotches  of  the  body  politic. 

Perhaps  the  reason  why  I  listened  through  Purdy's  speech 
without  the  thought  obtruding,  "Aha,  a  single-taxer,"  or  "now 
the  fixed  idea  bobs  up  serenely !" — is  that  Purdy  is  not  so  severe- 
ly rigid  a  single-taxer  as  not  to  admit  that  there  are  degrees  of 
viciousness  in  systems  of  general  property  taxation.  The  good 
single-taxer,  like  the  good  prohibitionist,  loves  simplicity  of 
classification  ;  all  taxation  of  personal  property  is  alike  damnable, 
thinks  the  first;  all  "rum"  is  alike  damnable,  thinks  the  second. 
Purdy,  with  regard  to  the  taxation  of  personalty,  has  worked 
himself  into  a  broader  position,  not  unlike  that  which  Henry 
Ward  Beecher  took  on  the  sightliness  of  the  human  ear.  "There 
are  no  pretty  ears,"  said  Beecher;  "they  range  from  the  tolerable 
to  the  hideous."  So  Purdy  notes  that  there  is  taxation  and  tax- 
ation: "Substitutes  for  the  direct  taxation  of  personal  property 
have  been  adopted 'in  many  countries  and  in  some  of  the  states, 
and  almost  all  of  them  are  much  to  be  preferred  to  your  present 
antiquated  policy.  *  *  *  I  would  unhesitatingly  urge  the 
adoption  of  certain  substitutes  for  the  tax  on  personal  property 
if  my  choice  were  confined  to  the  tax  as  it  now  exists  or  a  sub- 
stitute for  it.  By  some  of  these  other  plans,  you  can,  if  you  de- 
sire, raise  more  revenue  and  impose  the  burden  more  evenly 
and  with  much  greater  justice  than  it  can  be  imposed  by  any 
system  of  ad  valorem  taxation  upon  personal  property."  All  of 
which  is  said  with  excellent  judgment  and  discretion — needing 
only  the  one  saving  clause:  that  such  tangible  personal  property 
as  may  be  easily  reached,  and  may  be  as  readily  assessed  on  the 
basis  of  its  value  as  real  estate,  need  not  be  taxed  in  a  perfect 
revenue  svstem,  but  may  be  taxed  on  substantially  the  same  basis 
as  real  estate  without  serious  injustice  or  serious  blemish  to 
"scientific  taxation."  All  idealists  should  learn  the,  to  them,  very 
difficult  lesson  that  there  are  degrees  in  the  beauty  and  desirable- 
ness of.  the  different  parts  of  what  thev  seek  to  establish.  They 
should  take  to  heart  the  words  of  Chief  Justice  Marshall  in 
M'Culloch  v.  Maryland,  "A  tiling  may  be  necessary,  or  very 
necessary,  or  absolutely  and  indispensably  necessary." 

When  Purdy  had  finished  his  address,  some  of  the  legislators 
plied  him  with  questions.  J.  A.  Peterson  of  Minneapolis  elicited 
the  "damnation  of  faint  praise"  which  lurks  in  the  mind  of  the 


HERTIG     ON     TAXATION.  229 

single-taxer  for  everything  but  his  fixed  idea,  by  asking  Purely 
what  substitute  for  the  present  personal  property  tax  he  would 
recommend. 

PURDY  :     "Almost  any  other  system  would  be  preferable." 
PETERSON:     "Please  recommend  some  special  one." 
PURDY  :     "The  Paris  plan  of  taxing  a  man  in  proportion  to 
the  value  of  his  home,  while  a  bad  one,  is  much  better  than  your 
Minnesota  plan,  or  than  that  plan  with  amendments  in  the  hope 
of  making  it  more  efficient." 

Senator  Wilson  of  Minneapolis,  having  in  mind  that  the  con- 
stitution of  the  state  of  New  York,  by  its  silence  regarding  taxa- 
tion, has  given  to  the  legislature  there  unhampered  dis- 
cretion to  deal  with  that  subject,  might  have  moralized  that  it  is 
one  thing  to  have  chances  and  another  thing  to  improve  them. 
Instead,  however,  he  went,  as  is  his  custom,  straight  to  the  point, 
and  said  to  Purdy :  "You  New  Yorkers  have  been  free  from 
constitutional  limitations  for  100  years  and  yet  you  do  not  think 
your  system  of  taxation  much  better  than  Minnesota's.  Will  it 
take  us  100  years  under  an  amended  constitution,  to  reach  New 
York's  present  stage?" 

PURDY  :  "I  must  strip  off  seventy  of  these  years  that  do  not 
count  at  all.  Tax  agitation  in  New  York  is  only  30  years  old. 
Trouble  over  tax  laws  is  a  symptom  of  health.  We  are  having 
that  trouble.  If  you  don't  have  trouble,  you  are  dead.  You  have 
got  to  have  growing  pains  all  the  time." 

Asked  by  W.  D.  Washburn,  Jr.,  of  Minneapolis,  as  to  the 
best  method  of  taxing  the  franchises  of  public  service  corpora- 
tions, Purdy  replied  that  all  occupying  several  tax  districts 
should  be  assessed  by  a  central  body.  As  between  getting  in- 
creased taxes  from  such  corporations  and  getting  reduced  street 
ra'ilway  fares  or  other  cheaper  service,  he  preferred  reduced 
rates  when  conditions  were  such  as  to  make  them  possible.  He 
seemed  to  avoid  studiously  any  mention  of  the  method  patented 
in  Illinois  and  sealed  with  the  approval  of  the  supreme  court  of 
the  United  States,  and  copied  in  substance  by  the  commission  in 
Sec.  83  of  its  proposed  code:  "In  ascertaining  the  value  of  any 
franchise  subject  to  taxation  under  subdivisions  IV.  and  V.  of 
Title  IV.  of  this  act,  the  assessor  or  assessing  board  shall  add 
together  the  value  of  the  capital  stock  and  funded  or  bonded 
debt  of  any  such  person  or  company  as  determined  by  him  or 
it,  and  shall  deduct  therefrom  the  value  of  the  real  and  personal  • 
property  rendered  for  taxation  by  such  person  or  company,  and 
the  residue  shall  be  used  as  the  basis  for  ascertaining  the  value 
of  the  franchise  owned  by  such  person  or  company,  and  the 
ii.ount  so  ascertained  shall  be  deemed  the  value  of  the  fran- 


230  HERTIG     ON     TAXATION. 

chise,  which  shall  be  subject  to  taxation  in  that  amount  as  such." 
He  seemed  to  avoid  also  with  like  care  any  reference  to  the 
merits  or  demerits  of  a  gross  earnings  tax.  He  could  not  in 
fact  very  well  make  mention  of  any  of  these  modes  of  taxation 
without  letting  the  single-tax  idea  escape  and  so  calling  undue 
attention  to  its  excluding  imperialism. 

Bowling,  speaker  of  the  House,  by  appropriate  question, 
drew  from  Purdy  the  opinion  that  it  is  better  to  amend  the  pres- 
ent constitution  than  to  wait  for  a  constitutional  convention  to 
submit  a  new  constitution. 

Riley,  of  Jackson  county,  asked  if  the  New  York  laws  provide 
an  efficient  way  of  reaching  notes  and  other  "credits !" 

PURDY:  'There  is  no  way  that  I  know  of.  The  ancient  Ro- 
mans had  a  pretty  good  one.  They  used  thumb  screws;  but 
even  that  way  was  not  entirely  successful.''* 

Purdy  made  no  mention  in  his  speech  of  the  Pennsylvania 
system  of  taxation;  but,  in  answer  to  a  private  inquiry  of  mine 
immediately  afterwards,  said  that  the  system  of  taxation  in  that 
state  is,  in  many  respects,  the  best  of  the  American  systems. 


*"A  leading  characteristic  of  the  later  [Roman]  Empire  is  grinding 
taxation.  The  government  being  overwhelmingly  powerful,  there  was  no 
limit  to  its  power  of  extortion ;  and  the  army  of  officials  which  had  now 
been  created  plundered  for  themselves  as  well  as  for  the  government. 
*  *  Roman  finance  had  no  conception  of  the  impolicy  of  laying  taxation 
so  as  to  depress  enterprise  and  trade.  *  *  *  It  is  related  in  many 
books  with  what  malignant  ingenuity  the  men  of  property  everywhere 
were,  so  to  speak,  chained  to  the  spot  where  they  lived,  that  the  vulture 
of  taxation  might  prey  upon  their  vitals ;  and  how  the  peasantry  were  in 
like  manner  appropriated  and  enslaved  to  military  service." — J.  R.  SEELEY, 
Roman  Imperialism  (Boston,  1889),  pp.  62-3. 

"In  respect  to  the  assessment  and  collection  of  taxes  on  personal 
property,  the  accounts  that  have  come  down  to  us  are  most  interesting, 
and  ought  to  be  full  of  instruction  to  legislators  and  tax  commissioners 
of  the  present  day  who  believe  in  patterning  tax  administration  after  old 
and  vicious  experiences,  so  far  as  the  changed  conditions  and  ideas  of 
civilization  in  the  nineteenth  century  will  admit.  The  proprietor  of  such 
property  was  in  the  first  instance  questioned  under  oath;  and  every  ^ at- 
tempt to  prevaricate  or  elude  the  intentions  of  the  legislator  was  punish- 
able as  a  capital  crime,  and  was  held  to  include  the  double  guilt  of  treason 
and  sacrilege.  If  the  results  of  personal  interrogation  under  oath  were 
not  satisfactory  to  the  tax  officials,  they  were  empowered  to  administer 
torture;  and  when  personal  stoicism  or  absolute  incapacity  failed  to 
effect  the  desired  results,  resort  was  had  to  other,  most  abhorrent,  and 
unnatural  methods  for  procuring  the  sum  at  which  their  property  was 
assessed — 'the  faithful  slave  being  tortured  for  evidence  against  his  mas- 
ter, the  wife  to  depose  against  her  husband  and  the  son  against  his  sire.' 
*  *  Zosimus,  a  historian  who  wrote  in  the  arly  part  of  the  fifth 
century,  says  that  the  approach  of  the  fatal  period  when  the  general  tax 
upon  industry  was  to  be  collected  'was  announced  by  the  tears  and  terrors 
of  the  citizens.'  " — D.  A.  WELLS,  Theory  and  Practice  of  Taxation,  p.  98. 


HERTIG    ON    TAXATION.  231 

"But  the  trouble  with  Pennsylvania,"  he  added,  "is  that  she  is 
lulled  to  sleep  by  the  revenue  which  the  corporations  in  whose 
grasp  she  is  grudgingly  concede  to  her.  Hence  there  is  no  spirit 
of  tax  reform  in  that  state,  no  'growing  pains.' ':  I  shall  make 
further  reference  to  the  Pennsylvania  system  in  another  chapter, 
merely  observing  here  that  the  plan  which  it  embodies,  far-reach- 
ing, but  moderate,  taxation  of  moneyed  interests,  has  shown  it- 
self to  be  very  successful  as  a  revenue  producer.  I  have  lingered 
perhaps  longer  than  necessary  over  Purdy's  address;  but  it  and 
the  incidents  connected  with  it  afford  good  "copy"  for  taxation 
and  a  good  background  for  my  own  comment.  It  is  moreover, 
a  pleasure,  almost  a  duty,  to  dwell  upon  the  cheering  fact  that  a 
reformer  who  would  fain  play  but  on  a  single  string,  can  so  far 
modify  his  strumming  upon  it  as  to  make  its  notes  practically 
inaudible !  If  the  bankers  coached  him  to  that  end,  still  the  fact 
is  cheering.  And  I  quite  agree  with  the  Minneapolis  Times 
that  if,  as  was  said,  the  bankers  saw  "fit  to  pay  his  expenses  and 
an  honorarium  beside,"  they  are  to  be  commended  therefor. 
"What,"  justly  asks  the  Times,  "what  difference  does  it  make 
whether  Mr.  Lawson  Purdy  ******  js  pajd  ^y  the 
bankers  of  the  twin  cities  *  *  *  or  not?  Mr.  Purdy  is  a 
prominent  man  in  his  own  state;  *  *  *  he  has  light  to 
throw  on  the  tax  subject;  what  we  want  at  this  juncture  is  light, 
lots  of  it,  a  flood  of  it." 

On  February  i8th,  the  House  by  167  yeas  and  I  nay,  voted 
that  the  Committee  on  Taxes  and  Tax  Laws  be  discharged  from 
further  consideration  of  "House  File  number  One"  (the  commis- 
sion's proposed  tax  code),  "and  that  said  bill  be  reported  back 
from  said  committee  by  its  chairman  immediately."  Wallace 
(Rep.)  of  Minneapolis,  chairman  of  the  committee,  as  one  de- 
lighted to  be  relieved  of  a  white  elephant,  made  haste  to  obey 
the  will  of  the  House,  which  thereupon  voted  that  the  bill 
be  made  a  special  order  for  the  next  day.  So,  on  February  19, 
actually  the  I3th  day  of  those  on  which  sessions  were  held,  a 
very  unlucky  1 3th,  as  it  proved,  for  the  proposed  code,  the 
House  in  committee  of  the  whole  began  consideration  of  "House 
File  Number  One."  The  members  had  been  duly  enlightened 
by  generally  attending  the  public  hearings  held  by  their  own 
or  by  the  senate  committee  on  taxation,  by  discussion  amongst 
themselves,  by  talks  with  their  constituents,  and  by  the  extend- 
ed comment  for  which  the  newspapers  made  room  in  their  col- 
umns. Bingham,  the  piquant  correspondent  of  the  Duluth  Ev- 
ening Herald,  thought  at  the  close  of  the  public  hearings  that 
their  effect  had  been  rather  to  bewilder  more  than  to  remove 
prior  bewilderment.  "If,"  he  wrote,  "the  discussions  could  be 


232  HERTIG     ON     TAXATION. 

continued  and  the  mystifying  intricacies  of  tax  matters  could 
be  twisted  about  for  a  few  weeks  longer,  the  condition  of  the  leg- 
islative mind  would  be  simply  appalling." 

It  is  easy  to  refute  this  pessimistic  statement.  The  legislature 
had,  in  fact,  learned  a  good  deal.  It  had  learned,  for  one  thing, 
that  snap  judgment  in  matters  of  taxation  was  likely  to  prove 
poor  policy  as  well  in  practical  politics  as  in  statesmanship, 
learned,  in  a  new  application,  that  the  clouded  title  of  "Do" 
makes  a  clear  title  for  "Don't."  The  solid  shot  of  official  facts 
and  figures  giving  the  experience  of  other  states,  and  showing 
how  easily  tax-dodgers  bowl  over  the  sanction  of  oaths,  had 
been  rained  upon  the  members,  and  staggered  in  many  their 
faith  in  the  efficiency  of  drastic  codes  for  taxing  personal  proper- 
ty. While  members  had  been  for  the  most  part  non-committal, 
the  expression  of  very  forcible  sentiment  against  the  proposed 
code  by  legislators  themselves  had  not  been  entirely  absent. 
Thus  Senator  E.  K.  Roverud  (Rep.)  of  Houston  county,  made 
bold  to  predict  in  the  Caledonia  Journal,  edited  and  published 
by  him,  that  the  drastic  oaths  prescribed  would  divide  personal 
property  owners  into  three  classes, — "perjurers,  jail-birds  and 
those  moving  into  other  states  where  the  tax  laws  are  more 
reasonable."  The  same  senator  in  said  Jonfnal  had  given  to  the 
commission's  "county  supervisor  of  assessments"  the  following 
drastic  send-off:  "If  he  is  disposed  to  do  his  duty,  that  is,  to  be 
a  ferret  and  a  bull  dog  at  the  same  time,  he  can  create  all  kinds 
of  disturbances,  and  if  he  is  not  driven  out  of  the  county  at  the 
end  of  a  shot  gun  before  his  term  is  out  he  may  count  himself 
lucky!"  There  were,  of  course,  some  members  of  the  legislature 
who  could  be  counted  on  in  advance  to  favor  only  conservative 
modifications  of  the  tax  laws ;  and  a  very  few,  as  the  natural  rep- 
resentatives  of  special  interests,  were  booked  to  put  the  brakes 
tt>  the  best  of  their  ability  on  most  of  the  moves  contemplated 
by  the  tax  reformers.  City  newspapers,  rarely  even  lukewarm 
toward  the  proposed  code,  were  mostly  aggressively  hostile  to- 
ward it;  and  two  score  or  more  of  country  paners  presented 
serious  objections  to  the  bill  as  a  whole  or  to  som?  of  its  features. 
I  say  two  score  as  having  counted  that  many,  without  making 
any  attempt  to  take  a  census  of  journalistic  opinion;  but  there 
must  have  been  many  more  country  papers  in  the  ranks  of  the 
opposition.  The  Pioneer  Press  said  editorially  on  February  5th, 
"The  great  majority  of  the  country  papers  in  the  state  seem  to 
be  either  opposed  to  the  new  tax  bill  or  doubtful  about  it." 
Minor  points  of  criticism  from  various  sources  were  directed 
against  the  bill, —  creation  of  new  offices,  new  salaries  new 
burdens,  its  increasing  the  labors  and  responsibilities  of  offi- 


HERTIG    ON    TAXATION.  283 

cers  already  existing.  The  county  auditors  in  convention  count- 
ed "fourteen  new  or  enlarged  duties  provided  for  [them]  in  the 
proposed  measure."  County  auditors  must  have  additional  cler- 
ical help,  as  the  new  code  would  fully  double  office  work.  Coun- 
ty treasurers  protested  loudly  against  various  administrative  fea- 
tures of  the  bill,  and  particularly  against  section  163  imposing 
upon  treasurers  the  functions  of  a  sheriff  in  collecting  delinquent 
personal  taxes,  and  sections  166,  167  and  168,  charging  the 
treasurer  with  the  full  amount  of  such  delinquent  taxes  and  mak- 
ing the  conditions  extremely  burdensome  for  him  in  getting 
credited  back  any  of  such  uncollected  taxes. 

Shrewd  politicians  are  aware  of  the  fact  that  the  launching 
of  tax  programmes  at  the  opposition  is  rather  dangerous  work 
and  fraught  with  all  the  possibilities  of  the  boomerang ;  hence 
partisan  labors  as  such  were  little  in  evidence  either  for  or 
against  the  proposed  code.  Senator  C.  O.  Baldwin  of  Duluth, 
mentioned  often  as  a  possible  Democratic  candidate  for  governor, 
was  thought  to  have  outlined  a  tax  platform  for  his  party  in 
enumerating  the  planks  which  he  favored  personally : 

i.  Amend  the  state  constitution  so  as  .to  make  needed  reform 
possible. 

2..  Amend  section  1530  of  the  code  of  1894  so  as  to  provide 
for  the  taxation  of  franchises. 

3.  Enact  a  law  for  the  taxation  of  foreign  corporations  so 
that  they  will  have  no  advantage  over  domestic  corporations. 

And  as  embodying  the  spirit  in  which  all  these  problems  should 
be  approached  Senator  Baldwin  outlined  the  following  discreet 
prefatory  plank :  "Under  the  present  prosperous  condition  of  our 
state,  county  and  municipal  governments,  there  is  not  present  or 
urgent  necessity  for  hasty  tax  legislation  and  the  people  do  not 
demand  drastic  or  oppressive,  tax  laws."  Strictly  speaking,  how- 
ever, no  vote  on  tax  matters  showed  a  clean  party  division,  though 
in  some  of  the  skirmishes  preceding  a  final  vote,  the  Democrats 
and  Populists,  as  will  be  seen  later,  voted  nearly  as  a  unit. 

When  on  February  ipth,  the  House  proceeded  to  consider 
"House  File  Number  One"  it  became  apparent  that  the  gauntlet 
which  it  had  to  run  fairly  bristled  with  amendments.  These  came 
in  so  thick  and  fast  that  J.  A.  Peterson,  of  Minneapolis,  moved 
that  any  member  be  privileged  to  offer  amendments — the  same  to 
be  specially  printed  in  convenient  form  for  the  use  of  the  House. 
The  motion  prevailed,  a  lucky  fact  for  me,  as  the  special  printing 
so  done  enables  me  to  be  accurate  without  being  burdensome  with 
details.  The  special  list  of  amendments  so  printed  came  out  in 
three  long  sheets,  somewhat  in  the  style  of  galley  proofs.  Their 
aggregate  length  is  a  little  more  than  nine  feet. 


234  HERTIG    ON    TAXATION. 

When  it  came  to  the  consideration  of  amendments, — and,  by 
the  way,  our  nine  foot  list  did  not  shut  out  other  and  further  of- 
ferings,— what  the  House  had  learned  from  the  various  sources  I 
have  mentioned,  or  what  it  knew  at  the  outset,  soon  became  ap- 
parent. One  thing-  it  knew  or  had  learned,  is  that  no  vessel  is  too 
slow  to  show  a  clean  pair  of  heels  to  the  ad  -valorem  tax  which 
pursues  her.  Laybourn  (Rep.),  of  Duluth,  was  therefore  enabled 
to  get  his  amendments  promptly  and  unopposedly  adopted  pro- 
tecting Minnesota  shipping  interests.  Roberts  (Rep.),  of  Minne- 
apolis, himself  a  voluminous  amender,  seconded  them.  One  of 
Laybourn's  amendments  relieved  owners  of  "vessels  navigating 
international  waters"  from  the  duty  of.  listing  them  for  assess- 
ment ;  another  of  his  amendments  incorporated  into  the  proposed 
code  "as  section  83a"  a  new  section  re-stating  practically  verba- 
tim the  law  of  1895,  the  substance  of  which  I  have  given  above, 
p.  216.  This  took  the  bull  of  constitutional  amendment  by  the 
horns  in  the  same  way  that  it  had  been  already  grasped,  a  way  al- 
ways open  to  the  people  when  other  ways  fail — quietly  ignoring 
the  constitution  and  going  ahead.  The  folly  of  taxing,  or  rather 
of  attempting  to  tax,  the  instruments  of  commerce  is  an  important 
lesson  to  be  learned  by  legislators.  That  the  popular  chamber 
of  the  legislature  of  Minnesota  unanimously  recorded  that  it  had 
learned  at  least  one  branch  of  this  lesson — that  the  assessor  must 
keep  his  hands  off  vessels  in  the  carrying  trade — is  alone  worth 
the  cost  of  the  special  session,  if  the  result  shall  show  that  it  is  in- 
deed finally  learned.  Let  us  hope  that  another  tax  commission, 
should  there  be  one,  before  the  constitution  of  Minnesota  shall  be 
finally  amended  ri^ht,  will  not  assume  that  its  own  superior  vir- 
tue need  be  evidenced  by  an  attempt  to  reinstate  the  constitution  in 
that  particular  feature,  which  the  vessel  tonnage  tax  law  of  1895 
has  snubbed  so  triumphantly  and  satisfactorily ! 

Another  branch  of  the  same  lesson  presents  greater  difficulty — 
especially  as  regards  the  putting  it  in  practice  under  the  Minne- 
sota constitution.  That  other  branch  relates  to  the  taxation  of 
grain,  on  which  I  have  above  expressed  myself  with  sufficient 
fulness.  Pp.  220-22 1.  The  vote  of  the  House  hereupon  in  view 
of  the  constitutional  difficulties,  is  not  quite  conclusive  as  to  the 
views  of  the  members  regarding  the  taxation  of  grain.  Laybourn 
offered  four  amendments  relating  to  such  taxation,  the  result  of 
which,  if  adopted,  "would  be,"  as  the  sturdy  Jacobson  of  Lac  Qui 
Parle  county  apprehended  them,  "to  exempt  practically  all  the 
grain  in  the  state."  The  question,  too,  came  in  such  shape  as  to 
make  it  seem  to  many  members  that  the  triumph  of  these  amend- 
-ments  won::''  1  e  merely  the  triumph  of  the  large  grain-holders, 
"of  vital  importance  to  the  elevator  and  grain  interests  of  Duluth," 


HERTIG     ON     TAXATION.  235 

as  Laybourn  urged.  Accordingly  Jacobson  had  with  him  in  op- 
posing them  the  strenuous  Populist  Sageng,  of  Otter  Tail,  Sa- 
geng's  like-minded  colleague  from  Polk  county,  and  Hickey 
(Dem.),  of  St.  Paul.  These  with  Jacobson,  the  Republican  lead- 
er, made  strong  speeches  against  the  amendments.  Jacobson 
made  the  point  that  grain  in  transit  could  not  be  taxed  under  the 
decisions  of  the  United  States  supreme  court,  and  that  no  other 
grain  could  or  should  be  exempt ;  that  the  talk  by  the  Duluth 
delegation  of  grain  taxation  driving  the  grain  interests  of  their 
city  out  of  the  state  was  not  made  in  good  faith ;  he  had  heard  the 
same  thing  before.  Wisconsin  could  not  profit  by  our  enacting 
here  the  proposed  code;  for  Wisconsin  law  is  just  the  same. 
Hence  there  would  be  no  discrimination  in  favor  of  Wisconsin. 
The  amendments  were  voted  down  by  a  large  majority — a  fact 
which  insured  the  solid  opposition  of  the  Duluth  delegation  to 
the  bill  as  a  whole,  though  the  friends  of  the  bill  at  no  time 
counted  on  much  help  from  that  quarter. 

I  have  already  chronicled  the  triumph  of  amendments  favor- 
able to  bankers  and  their  customers.  A  group  of  amendments 
of  great  importance  was  offered  by  Wallace  of  Hennepin.  Nearly 
all  of  these  were  adopted.  They  struck  bodily  out  of  the  proposed 
code  sections  12,  37.  38,  45,  46,  48,  49,  50  and  51.  They  .aimed 
to  strike  out  of  it  also  section  33  and  34  which  cumbrously  provide 
for  listing  by  consignees  and  for  the  following  up  of  property  so 
listed,  wherever  it  may  be,  by  spurring  the  assessor  and  county  su- 
pervisor of  assessment  to  strenuous  efforts  in  that  behalf.  But 
the  House  had  a  little  indulgence  for  the  commission's  work  be- 
fore sweeping  it  all  aside,  and  concluded  to  let  sections  33  and  34 
stand  awhile.  The  Wallace  amendments  also  struck  out  sections 
35  and  39,  and  substituted  therefor  corresponding  sections  of  the 
present  tax  laws,  or  other  provisions  much  milder  than  those 
stricken  out.  A  delusive  appearance  of  savage  rod  in  pickle  tor 
the  tax-dodger  was  kept  up  by  an  amendment  offered  by  Jacob- 
son  (familiarly  called  "Jak:e"  by  his  fellow  members  and  the  re- 
porters) of  Lac  Qui  Parle,  providing  that  where  a  victim  refuses 
to  list  his  property  or  to  swear  to  his  listing,  the  county  auditor, 
after  the  assessor  shall  have  hit  such  victim  to  the  full  extent  of 
the  assessor's  information  and  belief — shall  hit  him  a?ain  by  tack- 
ing atop  of  the  assessor's  estimate  a  penalty  to  the  amount  of  50 
per  cent  thereof.  Any  victim  feeling  himself  aggrieved  by  such 
guess  and  a  half  heaped  up  opposite  his  name  in  the  assessment 
book,  may  appear  before  the  county  board  of  equalization  and 
show  cause,  if  any,  why  the  penalty  should  be  stricken  off — a  clear 
case  on  its  savage  face  of  "heads  I  win,  tails  you  lose."  For  the 
assessor's  guess  and  a  half  may  fall  short  of  a  correct  assessment 


236  HERTIG    ON    TAXATION. 

and  a  half,  in  which  case  the  victim  is  amply  rewarded  for  his 
scruples  against  perjury;  whereas  if  the  guess  and  a  half  should 
come  a  trifle  high,  the  victim  may  still  appear  before  the  county 
board,  and  show  that  he  has  experienced  a  change  of  heart  by 
swearing  in  due  form  of  law,  or  in  that  form  which  has  been 
likened  to  one  of  the  stripes  of  the  rainbow. 

I  do  not  know  who  first  framed  the  Jacobson  amendment,  nor 
have  I  thought  it  worth  while  to  trace  the  evolution  of  similar 
provisions  in  the  codes  of  the  American  states.  Illinois  (  ?•)  may 
have  originated  them;  has  had  them,  at  least  since  18 — .  'Certainly 
there  is  no  louder  wailing  anywhere  than  in  the  state  of  Illinois 
over  the  craft  and  cunning,  the  omnipresence  and  ubiquity  of  the 
tax-dodger.  And  I  have  at  last  found  a  case,  coming,  too,  from 
Illinois — in  my  elaborate  speech  to  the  tax  committee  of  the 
House  and  a  miscellaneous  audience,  on  February  14,  I  challenged 
anybody  to  produce  one  from  anywhere,  and  paused  in  vain  for  a 
reply — of  prosecution  for  perjury  in  swearing  to  an  assessment 
list.  Guess  what  sort  of  a  defendant  the  people  of  Illinois  thus 
indicted  and  prosecuted.  "I  give  it  to  you  in  a  thousand,"  as  the 
French  say.  Exhaust  your  thousand,  and  then,  learn  that  the 
defendant  is — a  widow  (colored)  !  Shades  of  Charles  Summer 
and  his  Civil  Rights  Bill ! — shall  the  negro  be  mobbed  in  the 
Solid  South,  and  not  have  in  the  good  Republican  state  of  Illinois 
the  white  man's  and  white  woman's  right  to  swear  with  impunity 
to  a  false  tax  schedule?  The  trial  judge,  Baker,  scored  tax-dod- 
gers, but  noted  it  was  passing  strange  that  the  defendant  before 
him  should  be  "picked  out  and  made  an  example  of,"  when 
"thousands  of  wealthier  persons  are  filing  the  same  kind  of  sched- 
ules and  committing  the  same  kind  of  offense  every  year." — Chi- 
cago Daily  News,  May  17,  1902.  I  shall  learn  the  outcome  of 
this  case  with  much  interest.  The  colored  widow  made  a  schedule 
for  assessment  in  1900,  and  afterwards  in  the  probate  court  ad- 
mitted that  the  schedule  would  not  be  found  quite  right,  "if 
Christ  came  to  Chicago."  Indicted  for  perjury  on  the  strength 
of  her  schedules  conflicting  with  her  admission  in  the  probate 
court,  she  rashly  thought  there  was  a  dead  open  and  shut  case 
against  her  and  pleaded  "guilty."  When,  perhaps  too  late,  she 
got  a  lawyer  and  the  permission  to  change  her  plea  to  "not  guilty/' 
her  eyes  were  opened  to  the  fact  that  under  the  former  revenue 
law,  money  in  bank  was  a  "credit"  and  not  money  from  an  assess- 
ing standpoint ;  howbeit,  unfortunately  for  her,  money  m 
bank,  under  the  new  Illinois  revenue  law,  is  held  by  Judge  Baker 
10  be  "cash  on  hand"  for  schedule  purposes.  The  newspaper  re- 
port from  which  I  glean  is  delightfully  vague  and  omissionate  as 
to  any  final  disposition  of  the  case. 


HERTIG     ON     TAXATION.  237 

I  beg"  the  reader's  pardon  for  digressing  even  one  moment 
from  so  intense  a  subject  as  the  Jacobson  amendment.  The  di- 
gression has  forced  into  a  new  paragraph  the  further  curious  fact, 
which  and  which  alone  I  at  first  meant  to  state  in  the  preceding 
one, — the  fact  that  "Jake's  amendment"  had  found  lodgment  in 
the  statutes  of  Minnesota  just  forty-two  years  before  he  offered  it 
as  something  new !  Had  not  only  got  itself  declared  law  in  Min- 
nesota forty-two  years  ago,  but  somewhat  more  recently  than 
forty-two  years  ago  had  got  itself  declared  no  law  in  Minnesota, 
because  it  is  unconstitutional.  In  the  laws  of  1860,  p.  26,  sec.  30, 
stands  almost  the  very  letter  of  the  fateful  amendment,  and  holds 
itself  out  as  duly  enacted  by  the  legislature  of  Minnesota.  The 
state  supreme  court  bowled  it  out  as  unconstitutional  in  McCcr- 
mick  v.  Fitch,  14  Minn.  252.  Whether  the  legislature  afterwards 
took  the  unnecessary  trouble  to  repeal  it,  I  have  not  thought  it 
worth  while  to  look  up.  The  court  reasoned,  in  substance,  and 
correctly,  that  the  "true  value  in  money"  contemplated  by  sec.  3  of 
art.  IX.  of  the  constitution  is  an  assessed  value  ;  that  the  only  organ 
for  grinding  out  assessed  values  -is  the  assessor  and  his  reviewing 
and  equalizing  superiors ;  that  when  the  assessor  assesses,  whether 
in  the  effulgent  li^ht  of  an  oath  or  in  the  dark  mystery  of  oathless 
"information  and  belief,"  it  is  neither  more  nor  less  an  assessment 
which  he  makes,  conclusively  presumed  in  the  unclouded  eye  of 
the  law  to  foot  up  to  the  "true  value  in  money"  of  the  property 
so  assessed,  and  of  all  the  property  subject  to  assessment,  of  the 
assessee — the  "true  value  in  money"  unless  it  is  made  truer  by  the 
duly  authorized  boards  of  review  and  equalization,  proceeding  ac- 
cording to  routine  and,  perhaps,  according  to  the  facts  that  may 
be  brought  before  them.  An  assessment  so  made  is  not  to  be 
lightly,  nor  can  it  constitutionally  be,  impeached  by  arbitrarily 
marking  it  up  for  the  non-swearing  Jones  and  letting  it  stand  un- 
marked for  the  cheerful  perjurer  Thompson.  To  allow  such  a 
thing,  were  to  play  at  fast  and  loose  with  the  constitutional  "true 
value  in  money"  of  sec.  3,  and  the  "equalized  and  uniform"  "cash 
valuation"  of  sec.  I  of  art.  IX.  In  fine  you  shall  not,  under  our 
constitution,  say :  The  assessor  barks  the  tree,  and  then  say  in 
your  next  breath,  the  assessor  barks  at  the  tree.  You  might  per- 
haps fine  Jones  $10.00  or  so  for  "neglect  or  failure  to  list,  or  to 
swear  to  the  return,"  but  to  raise  that  question  you  must  impose 
your  fine  as  such,  and  try  to  get  it  as  such ;  yon  can't  slide  it  in  as 
a.  cold  deck,  calling  it  an  assessment,  or  a  50  per  cent,  rise  in  an 
assessment.  The  court  further  held  that  in  the  case  at  bar  the 
assessment  of  the  individual  who  complained  of  the  50  per  cent, 
rise  was  void  throughout,  and  that  no  tax  could  be  collected  from 
him  on  such  assessment.  Hence  if  the  Jacobson  amendment  had 


238  HERTIG    ON    TAXATION. 

finally  become  a  seeming  statute,  knowing  tax-dodgers  might  have 
been  seen  beseeching  county  auditors  to  mark  up  their  assessments 
by  50  per  cent.  Perhaps  even  some  disguised  "boodler"  im- 
posed on  "Jake"  and  brought  to  him  a  Greek  gift  with  "tax  re- 
form" blown  in  the  bottle. 

Jacobson,  though  sturdy,  is  to  quote  a  Baconian  phrase, 
"hugely  politic."  The  Wallace  amendments  came  up  before  he 
offered  his  own.  Wallace  in  championing  them  stated  truly  that 
they  eliminated  the  drastic  and  inquisitorial  features  of  the  bill. 
Stark  (Rep.),  of  'Chisago  county,  then  said  it  seemed  to  him  that 
there  had  been  a  combination  of  the  friends  and  enemies  of  the 
bill — a  combination  that  he  did  not  understand.  Whereat  much 
laughter,  amid  which  Jacobson  took  the  floor.  He  conceded  that 
the  Wallace  amendments  went  a  long  way  toward  satisfying  com- 
plaints against  the  bill,  but  beyond  question  they  went  too  far. 
He  thought  it  unwise  to  adopt  them.  "They  favor  a  class  of  tax- 
dodgers.  To  adopt  them  is  truckling  to  a  lot  of  people  that 
threaten  to  leave  the  state,  if  their  demands  are  not  satisfied. 
For  my  part  I  say,  let  'em  go,  .for  they  are  not  good  citizens. 
If  this  bill,  as  it  comes  from  the  tax  commission  would  drive  them 
all  out  of  the  state  tomorrow,  I  would  vote  for  it.  If  other  states 
were  enacting  stringent  laws,  and  tax-dodgers  on  that  account 
were  emigrating  to  Minnesota,  I  would  vote  for  a  measure  that 
would  keep  them  out !"  He  then  offered  his  amendment  above 
described.  Wallace  laughingly  offered  support  for  support — he 
supporting  Jacobson's,  if  Jacobson  his.  It  was  now  noon,  Feb- 
ruary 2Oth ;  all  were  hungry,  and  some  wanted  a  little  further 
time  for  considering  the  amendments.  So  an  adjournment  was 
taken  until  two  p.  m. 

By  the  time  the  House  convened  in  the  afternoon,  J.  A.  Peter- 
son, of  Minneapolis,  a  shrewd  politician,  who  stepped  from  a 
county  attorneyship  to  the  legislature,  and  who  hopes  to  step 
from  the  legislature  to  congress — seemed  to  have  united  all  who 
favored  the  bill  in  any  shape.  At  any  rate  he  appeared  as  the 
spokesman  of  what  bore  every  mark  of  a  compromise,  and  skill- 
fully pressed  all  the  points  he  invoked  in  its  favor.  He  favored 
both  the  Jacobson  amendment  and  the  Wallace  amendments. 
Noting  that  the  Wallace  amendments  would  take  out  the  inquisi- 
torial and  drastic  features,  he  pointed  out  that  the  powers  of  the 
tax  commission  and  of  the  county  supervisor  of  assessments 
would  remain  unchanged.  The  tax  commission  was  really  the 
feature  of  the  bill.  Left  in  by  the  amendments,  as  it  was,  it  could 
reach  the  iron  mine  corporations  now  escaping  taxation  to  as 
°-reat  an  extent  as  the  public  service  corporations.  He  dwelt  upon 
the  fact  that  a  tax  commission  in  Michigan  as  part  of  its  first 


HERTIG    ON    TAXATION.  239 

year's  work  had  increased  the  assessment  of  mines  in  that  state 
by  $80,000,000.  The  bill  as  an  unamended  whole  had  in  and  out 
of  this  House  able  and  earnest  opponents.  Personally  he  would 
be  glad  to  vote  for  it  without  these  amendments.  Without  them 
he  feared  that  it  could  not  pass.  He  would  therefore  vote  for 
adopting  them  and  hoped  all  friends  of  the  bill  would  do  likewise. 
Since  they  could  not  get  everything,  better  take  what  they  could 
get.  Jacobson  finally  took  substantially  the  same  ground  and 
withdrew  his  opposition  to  the  Wallace  amendments. 

Before  the  vote  on  them  was  taken,  Sageng,  the  sturdy  Popu- 
list from  Otter  Tail,  made  a  warm  dissenting  speech.  "You  al- 
leged friends  of  this  new  tax  code,"  said  he,  "are  afraid  to  stand 
up  for  it  on  a  fair  and  square  basis.  You  forsooth  are  for  it  as  it 
stands;  you  accept  these  amendments  only  because  the. other  fel- 
lows must  have  them.  The  fact  is  you  have  got  up  this  unKoly 
compromise  on  your  own  account.  I  don't  like  it,  and  I'll  have 
none  of  it.  These  drastic  and  inquisitorial  features,  as  you  call 
them,  are  vital  to  the  bill ;  pass  it  without  them,  and  the 
bill  will  be  a  dismal  failure.  Your  unholy  spirit  of  com- 
promise is  dangerous ;  it  favors  the  tax  dodger,  or,  as  I  prefer 
to  call  him,  the  tax  thief.  I  think  a  tax  dodger  is  as  bad  as  a 
man  who  breaks  into  the  county  treasury  and  steals  public  funds. 
I  congratulate  myself  that  I  voted  against  the  law  creating  the 
tax  commission.  I  certainly  am  not  to  blame  tor  the  result  of  it, 
any  more  than  for  these  amendments  to  which  I .  am  unalterably 
opposed." 

In  the  further. course  of  the  debate,  Roberts  of  Hennepin,  said 
in  favor  of  the  Wallace  amendments  that  they  take  away  inquisi- 
torial powers  from  nobody  but  the  assessor. 

PLOWMAN  (Populist)  of  Otter  Tail :  "You  mean  that  it  takes 
away  from  the  local  authorities  all  power  of  seeing  that  things  are 
assessed  properly !" 

ROBERTS  :  "If  you  want  to  see  a  panic,  get  this  bill  passed 
without  amendments !" 

The  division  on  the  Wallace  amendments,  so  far  as  the  debate 
showed,  was  largely  between  the  cities  and  the  country— the 
country  members  claiming  that  by  their  adoption  the  cities  would 
escape  measures  that  would  uncover  their  hidden  wealth  for  as- 
sessment, while  the  farming  communities  would  be  still  caught  as 
they  have  been  heretofore. 

The  Jacobson  amendment  was  first  put  to  a  vote,  and  was 
adopted  by  81  to  18.  It  is  an  instructive  commentary  on  hasty 
and  over-zealous  legislation  that  nobody  remembered  that  this 
amendment  once  stood  as  law  in  Minnesota  until  the  supreme 
court  held  it  to  be  unconstitutional,  and  that  nobody,  on  its  own 


240  HERTIG  ON   TAXATION. 

showing",  suggested  that  it  would  be  so  held.  As  a  statute  once 
more,  it  would  have  been  a  boon  to  tax-dodgers.  The  Wallace 
amendments  were  carried  to  the  extent  already  stated,  but  by  a 
smaller  majority — 60  to  46. 

Of  the  18  votes  against  the  Jacobson  amendment,  15  were  Re- 
publican and  three  Democrat.  The  three  Democrats  were  from 
city  districts,  as  were  also  eight  of  the  15  Republicans.  The  vote 
on  the  Wallace  amendments,  present  mildness  against  new  dras- 
ticity,  is  interesting'.  Of  the  60  yeas,  only  Butler  (Dem.),  Fust 
fDem.),  Hemsted  (Dem. -Pop.),  Hickey  (Dem.),  and  Mahood 
(Pop.),  are  non-Republican.  The  55  Republicans  who  voted  yea 
were  not,  as  might  be  thought,  nearly  all  from  cities.  In  fact 
only  27  of  them  (classifying  important  places,  Winona,  Still  water, 
Faribault,  Brainerd  and  Rochester  with  the  larger  cities  for  the 
purposes  of  this  count)  were  city  representatives.  Four,  however, 
of  the  non-Republican  yeas  were  city  votes,  counting  Hemsted  of 
Crow  Wing  as  a  city  voter.  It  is  a  question,  then,  whether  city 
votes  constituted  a  bare  majority  of  these  60  yeas.  Per  contra 
there  were  some  city  votes  in  the  nays.  The  aggregate  Populist 
and  Democrat  nay  vote  was  15,  including  therein  three  city  votes ; 
but  of  the  31  Republicans  who  voted  nay,  only  three  were  from 
cities.  The  40  country  members  who  voted  nay  on  the  Wallace 
amendments  indicate  very  nearly  the  real  strength  of  the  proposed 
code  in  the  House.  After  the  vote  was  taken  various  ones  of  the 
nays  declared  that  they  would  not  vote  for  the  bill  as  amended. 
.  The  Roberts  amendments,  substantially  all  of  which  seemed  to 
aim  at  making  the  proposed  code  more  certain  and  definite  fell 
under  suspicion  of  having  been  inspired  by  "corporation  influ- 
ences" ;  and  so  all  of  them  that  sounded  important  went  by  the 
board.  The  particular  brick  that  set  the  Roberts  row  a-toppling 
was  inscribed  with  a  proposition  to  let  the  street  railwav  com- 
panies show,  as  a  part  c|f  the  report  prescribed  by  sec.  70,  the  cost 
of  renewing  their  plants,  roadbed  and  equipment,  if  so  renewed 
at  any  time  from  the  proceeds  of  bonds  or  stock,  and  the  actual 
value  of  their  real  property  or  their  personal  property,  other  than 
franchises,  at  the  time  of  assessment  as  compared  with  their  origi- 
nal cost,  if  such  property  actually  cost  more  than  its  present  values. 
Jacobson  thought  this  would  destroy  the  intended  effect  of  the 
new  code.  Roberts  was  twitted  with  his  professed  friendliness 
for  the  bill.  Larson  (Rep.),  of  Redwood  county,  said:  "We 
have  heard  a  good  deal  about  the  enemies  of  this  bill ;  now  we  are 
just  finding  out  who  they  really  are." 

The  next  day,  however,  February  2  ist,  the  undaunted  Roberts 
offered  a  further  block  of  amendments  relating  mostly  to  admin- 
istrative features  and  beginning  with  sec.  75  and  flying,  with 


HERTIG    ON    TAXATION.        .  241 

many  a  descent  on  intermediate  sections,  to  sec.  155.  Encouraged 
by  his  success  in  getting  these  adopted,  he  suddenly  flew  back  to 
sec.  76,  requiring  "other  public  service  companies"  to  make  annual 
reports  to  the  assessor,  and  setting  forth  what  such  reports  shall 
contain.  To  sec.  76,  then,  he  offered  an  amendment  giving  to  any 
such  company  the  right  to  "present  such  additional  facts  or  state- 
ments with  regard  to  its  business  and  the  income  derived  there- 
from, as  may  tend  to  show  what  proportion  of  each  arises  from  its 
enjoyment  of  any  right,  privilege  or  franchise."  Here  the  vigilant 
house  again  suspected  an  attempt  to  "ball  up"  the  plain  letter  of 
the  proposed  new  code  in  the  interest  of  public  service  corpora- 
tions, and  voted  down  the  amendment  to  sec.  76.  Roberts,  how- 
ever, remained  in  the  thick  of  the  fight,  and  still  offered  amend- 
ments of  a  minor  character  until  Monday,  February  24th,  the  last 
day  on  which  any  were  offered. 

Populist  statesmanship  was  not  unrepresented  with  amend- 
ments. Oppegard  of  Polk  offered  two  which  were  adopted.  One 
of  them  cut  a  printer's  fee  of  15  cents  per  description  of  delin- 
quent real  estate  to  12  cents  per  description.  The  other  cut  down 
to  12  cents  a  printer's  fee  of  twenty  cents  for  the  like  description 
in  "notices  af  expiration  of  period  of  redemption  of  real  property 
sold  for  taxes."  On  February  24th,  just  before  the  bill  was  voted 
upon,  Schurman  (Rep.)  of  Ramsey,  himself  printer,  editor  and 
publisher,  came  to  the  rescue  of  the  "capitalist  press,"  and  asked 
the  unanimous  consent  of  the  House  to  move  a  reconsideration 
of  the  Oppegard  amendments,  which  had  been  adopted  the  day 
before.  Laybourn  objected,  "and  the  request  was  denied." 

Plowman  (Pop.)  of  Otter  Tail,  was  not  so  lucky  with  his 
amendment.  Opposed  to  what  he  called  the  centralizing  features 
of  the  "state  board  of  review,"  or  equalization  as  constituted  by 
<-he  proposed  codes — a  board  to  consist  of  the  governor,  state 
auditor,  secretary  of  state,  attorney  general,  and  the  three  tax 
commissioners, — Plowman  moved  to  amend  by  making  the  state 
board  of  equalization  consist  of  the  governor,  auditor  of  state  and 
attorney  general,  "together  with  one  member  [an  elector]  from 
each  congressional  district,  not  a  member  of  any  county  board  of 
equalization  to  be  appointed  by  the  governor  with  the 

advice  and  consent  of  the  senate."  Such  board  to  have  power  to 
raise  and  lower  assessments  and  to  so  operate  on  any  district  in- 
dependent of  other  districts,  but  subject  to  the  general  limitation 
that  "they  shall  not  reduce  the  aggregate  valuation  of  all  property 
in  the  state,  as  returned  by  the  several  county  auditors  more  than 
one  per  centum  on  tl^e  whole  valuation  thereof."  This,  of  course, 
0:1  a  division  between  the  country  and  city  members  of  such  board, 
would  enable  the  preponderant  faction  to  reduce  assessments  for 


242  HERTIG    ON    TAXATION. 

its  own  territory,  but  would  force  it  at  the  same  time  to  raise  cor- 
respondingly, or  nearly  so,  the  assessments  in  the  territory  of  the 
other  faction.  Notwithstanding — or,  perhaps,  because  of — this 
objectionable  feature,  Plowman's  amendment  came  near  adoption, 
being  lost  on  the  close  vote  of  48  yeas  and  52  nays.  The  negative 
votes  were  all  Republican,  with  one  exception:  Fust  (Dem.),  of 
Minneapolis,  voted  nay.  All  the  other  Democrats  present  and 
all  the  Populists  voted  yea — making  an  aggregate  of  18  Demo- 
crat and  Populist  votes  in  the  48  yeas. 

Hurd  (Rep.),  of  St.  Paul,  got  one  important  amendment 
adopted.  Sec.  64  of  the  proposed  code,  following  the  usual  prac- 
tice in  assessing  bank  stocks,  provides  that  the  assessor  shall  de- 
duct the  amount  of  any  bank's  "legally  authorized  investments  in 
real  estate"  from  the  aggregate  amount  of  its  capital  and  surplus 
fund,  "and  the  remainder  shall  be  taken  as  a  basis  for  the  valua- 
tion" of  its  shares.  Hurd's  amendment  provided  that  the  assessor 
should  deduct  along  with  the  real  estate  "also  all  legaf  investments 
in  United  States  bonds."  The  amendment  was  adopted  February 
24th.  But  during  the  noon  recess  of  the  same  clay  it  was  discov- 
ered that  this  amendment,  if  it  should  become  law,  would  exempt 
entirely  many  a  bank  from  taxation ;  and  so  in  the  afternoon  it 
was  promptly  reconsidered  and  killed. 

During  the  pendency  of  the  various  amendments,  an  occasional 
opposition  partisan  lead,  necessarily  from  a  short  suit,  made  a 
faint  ripple  in  the  proceedings.  Thus  Pennington  (Dem.),  of. 
Dakota  county,  moved  on  February  2Oth  to  amend  sec.  23  by 
striking  out  the  word  "commission"  and  inserting  in  place  thereof 
the  word  "commissioner."  There  had  been  some  talk  amongst 
members  and  others  of  substituting  a  tax  commissioner  for  the 
commission  of  three  members  contemplated  by  the  bill.  The  ef- 
fect of  Pennington's  amendment,  if  adopted,  would  have  been  to 
commit  the  House  not  to  the  "single  tax"  but  to  a  single  tax 
commissioner.  It  was  looked  upon  as  a  feeler  in  the  direction 
of  setting  the  Republicans  to  fighting  among  themselves  on  the 
merits  of  one  tax  commissioner  as  against  a  board  of  three,  and 
was  promptly  killed  by  an  overwhelming  vote. 

Pennington  was  luckier,  however,  when  on  February  24th, 
he  appealed  to  the  spirit  of  fair  play  in  the  Flouse  by  moving  an 
amendment  to  sec.  129  to  the  effect  that  "not  more  than  two  of  the 
[tax]  commissioners  so  appointed  shall  be  members  of  the  same 
political  party."  The  amendment  was  adopted  by  56  yeas  to  47 
nays.  Even  this  amendment  did  not  poll  in  its  favor  quite  all  the 
non-Republicans:  Sikorski  (Dem.),  of  Winona,  voted  nay!  It 
may  be  remarked  in  parenthesis,  that  the  appointment  of  boards, 
where  the  law  forbids  that  all  the  members  thereof  be  of  one  poli- 


HERTIG    ON     TAXATION.  243 

tical  party,  occasionally  subjects  the  appointing  power  to  peculiar 
embarrassment.  In  Iowa,  for  instance,  is  such  a  law ;  and  my 
friend  Cummins,  governor  of  that  state,  has  trouble  in  finding 
Democrats  for  minority  appointments ;  whoever  he  selects  in  that 
capacity  is  promptly  declared  to  be  "no  Democrat"  by  scores  who 
claim  to  know ;  and  if  of  those  scores  some  one  were  so  appointed, 
another  flying  squadron  would  promptly  tag  him  "no  Democrat" 
as  well.  Hard  lines  for  a  party  when  a  Republican  governor 
opposed  to  it  must  decide  on  the  party  credentials  of  its  alleged 
members !  As  illustrating  the  see-saw  of  sentiment  I  add  that 
.when  three  or  four  days  later  the  like  amendment  was  offered  to 
the  Jacobson  bill,  the  same  House  voted  it  overwhelmingly  down. 

And  now,  well  towards  noon  of  February  25th,  "House  File 
Number  One,"  with  a  large  slice  of  its  drastic  heart  cut  out  by 
amendment,  was  put  to  vote  on  the  question  of  its  passage.  The 
official  record  is  of  Spartan  brevity :  "And  the  roll  being  called, 
there  were  yeas  54  and  nays  60,  as  follows :  [Yeas  and  nays 
given  by  name.]  So  the  bill  did  not  pass." 

Those  who  voted  yea  were : 

Aanenson  (Rep.),  Alley  (Rep.),  G.  W.  Armstrong  (Rep.), 
Babcock  (Rep.),  Bean  (Rep.),  Brubaker  (Rep.),  Burns  (Rep.), 
Bush  (Rep.),  Cooke  (Rep.),  Dealey  (Dem.),  Deming  (Rep.), 
Dorsey  (Dem.),  Gait  (Rep.),  Gandrud  (Rep.),  Grass  (Rep.), 
Harden  (Rep.),  Haugen  (Rep.),  Haugland  (Rep.),  Henricks 
(Dem.-Peop.),  Herbert  (Dem.),  Hillary  (Rep.),  Hillmond 
(Dem.-Peop.),  Hinton  (Rep.),  Hogan  (Rep.),  Holm  (Rep.), 
Hunt  (Rep.),  Jackson  (Rep.),  Jacobson  (Rep.),  Johnsrud 
(Rep.),  Larson  (Rep.),  Lee  (Rep.),  Lommen  (Rep.),  W.  Nelson 
(Rep.),  Neubauer  (Rep.),  Nichols  (Rep.),  Nolan  (Rep.),  Ny- 
quist  (Rep.),  O'Neil  (Rep.),  Ofsthun  (Rep.),  J.  A.  Peterson 
(Rep.),  Rapp  (Rep.),  Roberts  (Rep.),  Sander  (Rep.),  Schwarg 
(Rep.),  Stark  (Rep.),  Stevenson  (Rep.),  Stites  (Rep.),  Swan- 
son  (Rep.),  Sweet  (Rep.),  Torson  (Rep.),  Wallace  (Rep.), 
Ward  (Rep.),  Wilder  (Rep.),  the  Speaker  (Rep.), — that  is  to  say 
49  Republican  and  five  non-Republican  yeas. 

Those  who  voted  nay  were : 

Alford  (Rep.),  Allen  (Rep.),  Anderson  (Rep.),  J.  A.  Arm- 
strong (Rep.),  Barte'au  (Rep.),  Benson  (Rep.),  Berg  (Rep.), 
Bosworth  (Rep.),  Bury  (Rep.),  Butler  (Dem.),  Gumming 
(Rep.),  Fust  (Dem.),  Gainey  (Dem.),  Hemsted  (Dem.-Peop.), 
Hickey  (Dem.),  Hurd  (Rep.),  Hymes  (Rep.),  Johnson  (Rep.), 
Kelly  (Rep.),  Lane  (Rep.),  Laybourn  (Rep.),  Lemke  (Rep.), 
Mahood  (Pop.),  Mallory  (Rep.),  Mark  (Rep.),  Martin  (Dem.), 
Miller  (Rep.),  Morley '(Rep.),  Morris  (Rep.),  H.  K.  Nelson 


244  HERTIG     ON     TAXATION. 

(Rep.),  Norman  (Rep.),  Noyes  (Rep.),  Ocobock  (Rep.),  Op- 
pegaard  (Pop.),  Pennington  (Dem.),  S.  D.  Peterson  (Rep.), 
Phillips  (Rep.),  Plowman  (Pop.),  Pope  (Rep.),  Pugh  (Rep.), 
Rich  (Rep.),  Rider  (Pop.),  Riley  (Rep,),  Ryan  (Rep.),  Sageng 
(Pop.),  Scherf  (Rep.),  Schurman  (Rep.),  Schutz  (Rep.),  Si- 
korski  (Dem.),  Smith  (Rep.),  Umland  (Dem.),  Von  Wald 
(Rep.),  Washburn  (Rep.),  Wells  (Rep.),. Whitford  (Rep.),  Wil- 
cox  (Rep.), — that  is  to  say,  44  Republican  and  16  non-Republican 
nays. 

The  above  analysis  of  the  vote  show  s  so  close  a  division  of  the 
Republicans,  that  the  Democrats  and  Populists  held  and  used  the 
balance  of  power,  and  so  defeated  the  bill.  Including  the  Lake 
county  member  in  the  St.  Louis  county  delegation,  Duluth  had 
six  representatives ;  and,  as  was  expected  they  voted  solidly 
against  the  bill.  The  Hennepin  county  delegation  of  sixteen  split 
even  on  the  vole,  while  of  the  Ramsey  county  eleven,  eight  voted 
against  and  three  for  the  bill.  Therefore,  out  of  the  aggregate  of 
thirty-three  representatives  from  Duluth,  Minneapolis  and  St. 
Paul,  the  vote  stood  n  yeas  and  2.2.  nays,  or  a  majority  of  two  to 
one  in  the  negative.  But  of  these  city  nays,  five  were  Democrat, 
so  that  of  the  44  Republican  nays,  27  were  from  what  are  usually 
called  country  districts.  Some  Republicans  before  the  vote  was 
taken,  charged  that  the  "fusionists,"  as  the  opposition  were  called, 
had  held  a  caucus  and  decided  to  vote  solidly  against  the  bill.  But 
as,  on  the  vote,  there  was  a  division  in  the  opposition  camp  of  five 
yeas  and  sixteen  nays,  it  does  not  seem  that  the  balance  of  power 
which  the  opposition  used  so  effectively  was  a  concerted  balance. 
The  Populists  proper  evidently  followed  the  sledge-hammer  lead 
of  Sageng :  all  of  thena  voted  nay. 

After  the  result  of  the  vote  was  announced  the  House  im- 
mediately adjourned,  and  a  livelv  canvass  was  made  by  friends 
of  the  bill  to  get  seme  member  who  voted  in  the  negative  to  move 
a  reconsideration,  and  enough  converts  besides  to  snatch  victory 
from  the  jaws  of  defeat..  This  was  so  far  successful  that  next 
day  "Von  Wald  moved  that  the  vote  by  which  House  File  One 
was  lost  be  reconsidered."  The  motion  was  lost  by  the  closest 
possible  margin,  there  being  54  yeas  and  55  nays.  So  the  bill  was 
finally  killed.  It  is  interesting  to  note  that,  while  the  yeas  for  re- 
consideration, 54,  were  just  the  same  in  number  as  the  yea  vote 
when  the  bill  itself  was  voted  on,  seven  voted  for  reconsideration 
who  had  voted  against  the  bill, — Gumming,  Feeney,  Martin,  Oppe- 
gaard,  Pennington,  Sageng,  and  Von  Wald, — converts  from  all 
parties,  though  only  one  Republican  was  in  the  lot.  Of  the  seven 
who  had  dropped  out  of  the  original  54, — Cooke,  Dorsey,  Hogan, 
Holm,  Lee,  W.  Nelson,  and  Ward, — Cooke  was  not  present  when 


HERTIG    ON    TAXATION.    .  245 

the  vote  on  reconsideration  was  taken ;  but  the  others  were  present 
and  voted  against  it.  Benalken  (Dern.),  who  was  absent  when  the 
vote  on  the  bill  was  taken  voted  against  reconsideration;  while 
of  the  60  that  voted  against  the  bill,  five  were  absent,  and  did  not 
vote  at  all  on  the  question  of  reconsideration.  These  were  Dob- 
bin, Lane,  H.  R.  Nelson,  Plowman,  and  Umland. 

The  stock  argument  of  friends  of  the  bill  was  that  the  farmers 
demanded  its  passage ;  but  the  division  amongst  the  country  mem- 
bers is  sufficient  evidence  to  the  contrary.  With  regard  to  the 
bill  as  a  whole,  many  farmers  were  doubtful ;  and  there  was  an 
occasional  strong  showing  by  farmers  of  vehement  sentiment 
against  the  bill.  Some  of  these,  men  of  influence  at  home,  "told 
their  representatives  that  if  they  voted  for  a  tax  code  that  would 
raise  their  farm  valuations  halt  a  dozen  times  and  put  a  tax  on 
grain  that  the  farmer  would  have  to  pay,  they  had  better  go  to 
some  county  where  they  were  not  known  after  the  legislature 
should  adjourn."  Any  one  "mixing"  much  with  the  members 
could  easily  verify  the  words  quoted  above,  which  are  from  the 
legislative  correspondence  of  the  D ninth  Evening  Herald. 


CHAPTER  XVI. 


Survivals  of  the  proposed  code  in  parts — Its  real-estate  tax  features  be- 
come law — Likewise  its  inheritance  tax,  though  ruined  by  eleventh 
hour  amendments — Inheritance  tax  in  no  way  limited  by  government  at 
Washington — Merits  of  Bentham's  escheat,  or  inheritance  tax — The 
Jacobson  bill,  and  its  rush  through  the  House — Argued  before  S-enate 
committee — The  monopoly  of  iron  mines— Concerning  public  service 
Companies — Senate  debates  about,  and  finally  kills,  Jacobson's  bill'. 


The  proposed  code  after  its  death  and  burial  as  a  whole  was 
resurrected  in  part.  One  part  of  such  part  known  as  the  Jacob- 
son  bill  "House  File  56,"  was  rushed  through  the  House,  only  to 
be  killed  in  the  Senate;  another  part  of  the  resurrected  portion 
known  as  the"  Anderson  bill  and  embodying  most  of  the  really  val- 
uable features  of  its  original,  namely  those  relating  to  the  penalties 
on,  and  collection  of  real  estate  taxes,  started  as  "House  File 
Number  58,"  and  finally  became  a  law  in  88  sections,  as  chapter  2 
of  the  laws  of  1902.  Still  another  resurrected  part  of  the  bill  re- 
lated to  the  tax  on  inheritances  (sees.  278-299  inclusive),  was 
launched  as  "House  File  Number  57,"  and  became,  unfortunately 
with  defacing  amendments,  a  law  in  24  sections  as  chapter  3  of  the 
laws  of  1902.  The  two  sections  it  contains  which  are  not  in  the 
original,  repeal  respectively  all  prior  acts  inconsistent  therewith, 
and  provide  that  it  shall  "be  in  force  from  and  after  its  passage." 
This  law,  too,  is  one  of  the  exxxl  works  of  the  tax  commission,  and 
is  fully  explained  and  justified  in  their  Report,  pp.  56-59.  The 
few  amendments  which  seriously  mar  its  efficiency  are  discussed 
below  in  this  chapter,  and  may  be  easily  repaired  at  the  next  ses- 
sion. The  Anderson  bill  (House  File  58)  follows  the  tax  com- 
mission's code  verbatim  as  to  the  subjects  mentioned, — the  amend- 
ments being  few  and  short,  and  born  of  a  desire  to  make  the 
administration  of  the  law  simpler  and  easier.  It  has  the  high  prac- 
tical indorsement  of  that  efficient  officer,  State  Auditor  Robert  C. 
Dunn,  who  argues  with  much  force  and  good  reason  that  the  An- 
derson bill  is  worth  to  the  state  a  great  deal  more  than  the  cost  of 
the  extra  session  which  made  it  a  law.  Under  the  law  before  the 
Anderson  bill  was  passed,  many  real  estate  owners  in  Northern 


HERTIG    ON     TAXATION.  247 

Minnesota  let  their  taxes  go  and  remain  delinquent  of  set  purpose. 
These  lands  when  nominally  sold  for  delinquent  taxes,  fell  nomi- 
nally to  the  state, — there  being  few  or  no  private  bidders  who 
would  put  up  their  money  in  Northern  Minnesota  for  tax  sale 
certificates.  From  time  to  time  the  legislature  would  pass  a  clear- 
ance sale  act,  whereby  the  lands  so  nominally  sold  to  the  state  at 
tax  sales  would  be  offered  and  sold  again,  under  the  provision  that 
at  such  clearance  sale  where  the  highest  bid  for  any  tract  or  piece 
should  amount  to  no  more  than  a  certain*  portion  of  the  taxes 
against  such  tract  or  piece  (usually  naming  as  the  minimum  the 
state  tax  for  a  certain  period)  the  person  so  bidding  should  own 
the  land  so  bid  off,  discharged  of  all  taxes  prior  to  such  a  named 
year.  Such  sales  were  always  well  attended  by  thrifty  owners 
and  hunters  of  bargains  in  tax  titles.  Some  pieces  were  sure  to  be 
neglected  or-  forgotten  by  careless  or  amateur  owners ;  and  these 
were  snapped  up  by  the  tax-title  sharks.  Between  these  and 
owners  attending  the  sale  to  "bid  in"  the  tracts  on  which  they  had 
neglected  to  pay  taxes,  there  was  always  an  amiable  comity :  shark 
did  not  bid  against  owner  who  was  present  to  remove  the  tax 
cloud  from  his  original  title ;  owner  did  not  bid  against  shark 
when  neglected  tracts  or  lots  were  offered.  Shark  frequently 
figured  as  owner  of  a  prior  shaky  tax-title,  which  he,  too,  as  a 
matter  of  profitable  speculation  had  not  protected  by  paying  sub- 
sequent taxes ;  and  now  at  the  clearance  sale  he  figured,  as  to  cer- 
tain tracts,  in  the  dual  role  of  owner  and  shark.  It  should  be 
added  that  the  taxes  lost  by  such  clearance  sales  were  local  taxes, 
and  not  those  accruing  to  the  state. 

It  is  hoped  by  means  of  the  Anderson  bill  to  discourage  own- 
ers of  real  estate  from  letting  the  taxes  thereon  go  delinquent. 
The  means  relied  on  to  that  end  are  a  general  strengthening  of  the 
proceedings  to  sell  real  estate  for  delinquent  taxes,  hardening  of 
the  terms  on  which  courts  may  hold  tax-titles  invalid,  and  particu- 
larly the  giving,  to  any  person  holding-  a  tax  sale  certificate  issued 
under  the  act,  the  right  "at  any  time  after  the  time  for  redemption 
from  the  tax  sale  on  which  said  certificate  was  issued  has  expired," 
to  "commence  a  suit  in  the  district  court  of  the  county  where  the 
lands  embraced  in  any  such  certificate  are  situate,  to  quiet  his  title 
thereto  without  taking  possession  of  such  lands."  If  in  such  suit, 
the  plaintiff's  title  is  held  invalid,  "for  any  cause  other  than  one 
which- renders  the  taxes  embraced  in  such  certificate  or  deed  void, 
or  that  such  taxes  have  been  paid,  or  the  property  was  exempt' 
from  taxation,  such  action  shall  not  be  dismissed  by  the  court, 
but  the  court  shall  ascertain  the  amount  due  the  plaintiff  for  all 
taxes,  and  all  subsequent  taxes,  penalties  and  costs  paid  by  him  or 
his  assignors,  if  any,  with  interest  thereon  at  the  rate  of  twelve 


248  HERTIG    ON     TAXATION. 

per  centum  per  annum  from  and  after  the  date  of  such  certificate, 
deed  or  payment,  and  decree  a  lien  against  such  lands  in  favor  of 
the  holder  of  such  certificate  or  deed  for  the  amount  so  ascer- 
tained, and  [thereupon  the  court  shall]  decree  a  sale  of  such  land, 
for  the  purpose  of  satisfying  such  lien  together  with  the  costs  of 
such  judgment  and  sale."  More  briefly  stated  it  will  cost  the 
owner  the  original  taxes  and  twelve  per  cent,  interest  thereon  and 
subsequent  taxes  and  twelve  per  cent,  interest  thereon,  even 
though  some  technicality  should  be  held  sufficient  to  defeat  the  tax 
title  as  an  entirety ;  and  the  same  action  which  demonstrates  such 
technicality  against  the  tax  sale  certificate  holder  suffices  for  the 
making  and  foreclosure  of  a  mortgage  for  said  amounts  in  his 
favor.  So  also  he  who  brings  suit  "to  vacate  or  set  aside  any  tax 
judgment  or  tax  certificate,  or  to  remove  a  cloud  upon  any  title 
created  by  any  tax  certificate,"  etc.,  must  pay  into  court  on  be- 
ginning such  suit  "the  amount  for  which  such  land  was  sold 
*  *  *  and  the  amount  of  all  subsequent  taxes,  penalties  and 
costs  paid"  by  the  holder  of  such  certificate  or  his  assignors,  with 
twelve  per  cent,  interest  on  the  whole,  but  if  "the  sole  claim  made 
in"  stating  the  cause  of  such  action  "is  that  the  taxes  for  which 
the  certificate  was  issued  had  been  paid  before  sale  or  that  the 
land  described  therein  was  exempt,"  the  plaintiff  is  dispensed  from 
making  such  payment  on  beginning  his  suit.  Due  provision  is 
also  made  for  the  like  protection  of  tax  certificate  holders,  who 
are  not  original  bidders,  but  came  in  as  assignees  of  the  state, 
where  in  lieu  of  other  bidders,  the  county  auditor  shall  have  "bid 
in"  lands  for  the  state. — Commission's  Code,  sees.  239,  240;  An- 
derson bill,  sees.  64,  65.  In  the  words  of  the  commission  (Report, 
p.  33),  "the  bill  provides  that  all  tracts  of  land  bid  in  by  the  state 
and  not  assigned  or  redeemed  within  three  years  shall  become  the 
absolute  property  of  the  state.  It  is  believed  that  the  bill  will 
thus  vest  the  state  with  absolute  title  to  such  property.  The  pres- 
ent law  [that  is  to  say  now,  the  old  law]  has  [had]  been  so  far 
modified  by  amendments  adopted  from  time  to  time  as  to  practi- 
cally negative  its  provisions  relating  to  absolute  sales." 

The  former  law  by  letter  and  construction  was  liberal  in  allow- 
ing abatement  of  taxes  and  particularly  in  allowing  the  refund- 
ment  of  moneys  to  those  who  held  tax  title  rights  which  on  one 
technicality  or  another  were  invalid.  As  the  commission  puts  it 
(Report,  p.  34)  the  old  law  in  those  respects  gave  rise  to  "num- 
erous and  grave  abuses."  The  commission  hoped  by  giving  to  it- 
self and  its  successors  exclusive  jurisdiction  to  allow  abatements 
(sec.  135),  but  "only  after  full  investigation  by  the  Tax  Commis- 
sion of  all  the  facts  relating  thereto,  and  the  favorable  recom- 
mendation of  the  board  of  county  commissioners  and  the  county 


HERTIG    ON     TAXATION.  249 

auditor" — hoped  to  correct  thereby  the  abuses  of  the  old  law  in 
that  regard;  but  neither  this  feature  of  their  code,  nor  any  sub- 
stitute therefor  became  law,  and  so  the  old  law  and  the  old  practice 
as  to  abatements  are  still  in  force.  That  portion,  however,  of 
their  code  which  relates  to  refundments  is  included  in  the  Ander- 
son bill,  and  seems  well  fitted  to  correct  the  abuses  which  had 
grown  out  of  the  former  law  in  that  behalf.  No  refundments 
now,  unless  the  property  is  exempt  from  taxation,  or  the  taxes 
shall  have  been  paid  before  the  sale,  or  unless  the  assessment  or 
levy  of  the  tax  sought  to  be  refunded  shall  be  void.  And  no 
merely  fanciful  technicality  shall  render  void  such  assessment  or 
levy.  "The  bill  makes  a  wide  departure  from  the  policy  of  the 
existing  law  [that  is,  now,  the  former  law]  as  to  refundments  in 
cases  where  tax  certificates  are  found  to  be  void  by  reason  of  a 
jurisdictional  defect  other  than  a  void  assessment  or  levy.  No 
refundment  will  be  allowed  under  the  bill  in  any  such  case.  In 
place  of  refundment,  the  certificate  holder  will  have  a  lien  upon 
the  tract  which  may  be  enforced  against  it." — Report,  p.  35. 

The  commission  on  the  same  page  notices  "the  pernicious  prac- 
tice" which  grew  up  under  the  former  law  "of  delaying  applica- 
tions for  refundments  in  order  to  enable  the  certificate  holder  to 
collect  a  high  rate  of  interest."  He  got  in  fact,  when  "refund- 
ment" was  made  the  amount  or  amounts  paid  by  him  with  8  per 
cent,  interest  from  the  date  of  such  payment  or  payments  to  the 
date  of  refundment.  This  "pernicious  practice,"  it  is  believed, 
will  be  effectually  checked  by  the  Anderson  bill.  To  show  some 
of  the  things  that  were  possible  formerly  in  the  name  of  "refund- 
ments," I  quote  again  from  the  commission's  report,  written  while 
the  former  law  was  still  in  force :  "It  now  happens  that  a  certi- 
ficate holder  will  remain  inactive  for  ten  or  more  years,  when 
sometimes  by  collusion  with  the  owner  of  the  property,  he  is 
able  to  collect  the  amount  paid  by  him  at  the  tax  sale  for  the  en- 
tire period  at  the  high  rate  of  interest  provided  by  law.  *  In  the 
meantime  the  right  of  the  state  to  reimburse  itself  out  of  the 
property  in  question  has  been  barred  for  one  or  more  years  by 
the  statute  of  limitations.  As  a  check  upon  so  glaring  an  evil, 
the  bill  provides  that  no  refundment  will  be  allowed  unless  the 
right  thereto  has  been  determined  or  the  certificate  and  appeal 
obtained  and  application  made  within  eight  years  from  the  date 
of  the  tax  sale.  No  interest  will  be  allowed  beyond  a  period  of 
six  months  after  the  right  of  refundment  has  been  determined." 

P-  35- 

The  taxation  of  inheritances  provided  in  "House  File  Num- 
ber 57,"  also  an  "Anderson  bill,"  may  be  made  with  a  few  easy 
amendments  to  cover  the  subject  with  fairness  and  discretion,  and 


250  HERTIG    ON    TAXATION. 

to  conform  to  the  state  constitution.  Such  taxation  in  the  United 
States  dates  from  the  year  1826,  when  Pennsylvania  passed  her 
first  statutes  taxing-  the  estates  of  decedents.  It  has  now  become 
a  popular  mode  of  taxation  ;  and  the  decisions  of  the  supreme 
court  of  the  United  States  holding'  squarely  that  the  taxation  so- 
called  of  estates  of  decedents  is  not  technically  taxation  of  prop- 
erty but  a  tax  on  the  right  of  succession,  are  shining-  examples 
that  legal  technicalities  may  be  as  powerful  instruments  in  favor 
of  the  people  as  they  often  are  against  them. — United'  States  v. 
Perkins,  163  U.  S.  628,  and  kindred  cases.  In  the  "case  cited, 
Mr.  Justice  Brown  said,  in  delivering-  the  court's  opinion :  "The 
[inheritance]  tax  is  not  upon  the  property  in  the  ordinary  sense 
of  the  term,  but  upon  the  right  to  dispose  of  it,  and  it  is  not  until 
it  has  yielded  its  contribution  to  the  state  that  it  becomes  the 
property  of  the  legatee."  To  the  average  reader  this  will  doubt- 
less sound  like  a  distinction  without  a  difference;  but  by  means 
of  it,  the  states,  as  regards  the  taxation  of  decedents'  estates,  are 
freed  from  the  iron  grasp  of  the  federal  constitution,  and  from 
congressional  control  as  well.  Congress  exempts  greenbacks  and 
United  States  bonds  from  taxation.  A,  who  was  a  citizen  of 
New  York,  and  died  there,  left  a  fortune  in  government  bonds. 
The  glad '  heirs  rejoiced  further  in  the  prospect  of  having 
no  inheritance  tax  to  pay.  Now  came  the  New  York  authorities, 
and  said,  under  the  sanction  of  the  supreme  court  of  the  United 
States :  "Good  people  it  may  seem  a  trifle  hard  on  you,  but  the 
commonwealth  of  New  York  must  really  add  a  slice  of  those 
bonds  to  the  common  wealth.  True  we  have  no  right  to  tax  them 
as  your  property — God  and  the  federal  statutes  forbid  that  we 
should  exercise  such  right.  But  property  is  one  thing,  and  the 
right  to  step  into  it  and  a  dead  man's  shoes,  as  you  will  soon  see, 
is  another  thing.  The  right  to  step  into  it  is,  in  New  York,  or  in 
any  American  state,  the  creature  of  such  state ;  and  the  will  of  the 
state  as  to  the  conditions  on  which  it  will  permit  you  or  any  one  to 
enjoy  that  right  within  her  boundaries,  is  supreme.  Not  only  did 
the  fathers  in  framing  the  constitution  of  the  United  States  forget 
to  prescribe  the  sort  of  toll  gate  which  a  state  shall  plant  before  a 
dead  man's  shoes,  but  the  supreme  court  of  the  United  States 
has  elaborately  acknowledged  that  they  did  so  forget.  The  will 
of  the  state  in  this  matter  is  the  supreme  law." 

The  tremendous  importance  of  this  doctrine  and  the  ample 
powers  which  it  leaves  to  the  states  to  use  a  free  hand  in  dealing 
with  estates  that  pass  through  probate — would  justify  much  fuller 
discussion  than  I  can  here  give  to  it.  In  it  ancl  otTier  peaceful 
means  that  lie  ready  to  the  people's  use  for  correcting  all  man- 
ner of  abuses  growing  out  of  ill-gotten  and  badly  used  properties, 


HERTIG    ON    TAXATION.  251 

may  be  found  the  only  antidote  to  the  poison  of  violent  revolu- 
tions. To  enumerate  these  means,  to  apprise  the  people  of  them  in 
plain  and  simple  language,  to  see  that  they  are  jealously  guarded, 
to  look  to  it  that  candidates  for  judgeships  shall  neither  he  elected 
nor  appointed  without  professing  allegiance  to  them,  to  provide 
for  the  summary  impeachment  of  judges  when  they  fail  in  such 
allegiance, — these  things  constitute  a  gigantic  but  imperative  task 
for  the  new  jurisprudence  to  attempt  and  perform. 

I  return  to  the  inheritance  tax.  The  commission  in  their  Re- 
port, p  p.  57-59,  give  an  excellent  summary  of  what  had  been 
done  in  that  matter  prior  to  the  enactment  last  winter  of  that  part 
of  their  proposed  code  which  relates  to  such  tax ;  also  a  good 
summary  of  said  part  which,  as  "House  File  57,"  is,  except  as 
defaced  by  unfortunate  amendments. now  a  law  of  the  state,  as. al- 
ready mentioned.  I  transcribe  here  Irfat  portion  oT  their  report : 

"The  first  attempt  at  that  species  of  taxation  by  this  state  was 
the  act  of  1885,  which  was  held  invalid  because  the  taxes  sought 
to  be  imposed  by  it  were  not  equal  within  the  constitutional  man- 
date. Assuming  evidently  that  it  was  requisite,  in  order  to  prop- 
erly legislate  upon  the  subject,  that  the  constitution  must  have 
given  express  authority,  the  legislature  submitted  the  amendment 
which  was  adopted  in  1896,  reading  as  follows : 

And  provided  further,  that  there  may  be  by  law  levied  and 
collected  a  tax  upon  all  inheritances,  devises,  bequests,  legacies, 
and  gifts  of  every  kind  and  description  above  a  fixed  and  specified 
sum,  of  any  and  all  natural  persons  and  corporations.  Such  a  tax 
above  such  exempted  sum  may  be  uniform,  or  it  may  be  graded  or 
progressive,  but  shall  not  exceed  a  maximum  tax  of  five  per  cent. 

The  framer  of  the  amendment  apparently  misconceived  the 
power  of  the  legislature  as  it  then  existed,  and  was  most  unfor- 
tunate in  the  language  employed.  There  can  be  no  doubt  that 
the  power  to  tax  the  estate  or  property  of  decedents  then  existed, 
so  long  as  the  method  adopted  conformed  to  the  rule  of  equality. 
Strangely  enough,  the  amendment  displays  on  the  part  of  its 
framer  a  misconception  also  of  the  character  of  the  legislation  of 
other  states.  With  few  exceptions  the  tax  is  imposed  by  those 
states  either  directly  upon  the  estates  of  decedents,  or  upon  the 
transfers  of  thre  property  of  decedents,  while  the  amendment  in 
question  requires  it  to  be  imposed  upon  "all  inheritances,  devises 
bequests,  legacies  and  gifts."  The  constitution  had  been  more 
wisely  framed  if  it  had  simply  provided  that  the  legislature  might 
impose  a  graduated  or  progressive  tax  upon  the  estates  of  de- 
cedents. Under  the  present  form  of  the  constitution,  it  is  impos- 
sible to  allow  an  exemption  of  $5,000,  as  at  present,  and  realize 
adequate  revenue  from  the  tax,  as  the  exemption  must  apply  to 


252  HERTIG     ON     TAXATION. 

every  inheritance,  devise,  bequest,  legacy  and  gift.  To  illustrate : 
A  decedent  having  an  estate  of  $25,000  has  only  to  devise  and  be- 
queath it  to  five  of  his  lineal  descendants  in  equal  amounts  in  or- 
der to  wholly  defeat  the  tax.  If  on  the  other  hand,  the  tax  were 
imposed  upon  the  estate,  a  single  exemption  would  be  permissible 
and  $20,000  of  the  estate  could  be  taxed. 

The  legislature  of  1897  attempted  to  frame  a  law  under  the 
present  form  of  the  constitution,  but  made  two  grave  mistakes : 
It  imposed  the  tax  only  upon  personal  property,  when  it  should 
have  been  imposed  also  upon  real  property.  It  imposed  it  upon  the 
entire  inheritance,  devise,  bequest,  legacy1,  and  gift  of  $5,000, 
when  it  should  have  been  upon  the  excess  above  that  amount. 
For  these  reasons  the  statute  was  held  invalid  by  the  supreme 
court  in  the  case  of  Dfeiv  v.  Tift,  79  Minn.  175. 

At  the  last  session  of  the  legislature  a  further  attempt  was 
made  to  legislate  upon  the  subject;  but,  as  yet,  the  validity  of 
the  act  has  not  been  adjudged  by  the  courts.  Without  express- 
ing any  opinion  as  to  its  compliance  with  the  constitution,  the 
commission  deemed  it  advisable  to  radically  change  some  of  its 
provisions.  The  provisions  of  the  bill  relating  to  the  subject  are 
embraced  within  Title  XVII.  It  will  be  found  by  comparing  those 
provisions  with  the  act  of  1901,  that  they  differ  from  it  in  the 
following  particulars : 

1.  The  bill  adopts  the  language  of  the  constitution  and  im- 
poses the  tax  upon  the  inheritance,  devise,  bequest,  legacy  or  gift. 

2.  It  reduces  the  amount  of  exemptions  to  one  thousand  dol- 
lars, thus  insuring  a  substantial  amount  of  revenue. 

3.  It  provides  for  the  payment  of  expenses  and  refundments 
out  of  the  state  treasury  instead  of  the  county  treasury,  inasmuch 
as  the  state  is  to  receive  the  whole  tax  and  should  therefore  defray 
the  expenses  of  its  collection. 

4.  It  arranges  sections  in  their  natural  and  logical  order. 

5.  It  eliminates  many  provisions  which  were  wholly  unnec- 
essary and  tend  only  to  confusion  and  uncertainty. 

In  reducing  the  amount  of  exemptions,  the  bill  is  yet  more 
liberal  than  similar  laws  of  several  other  states.  In  Pennyslvania 
it  is  $250,  in  New  York  and  Maryland,  $500 ;  in  Connecticut, 
$1,000;  in  'Colorado  $5,000,  but  the  tax  is  upon  the  estate  as  an  en- 
tirety. 

If  it  be  objected  that  the  exemption  should  be  a  higher  sum 
than  $1,000,  we -reply  that  when  the  beneficiary  is  a  father, 
mother,  husband,  wife,  child,  brother,  sister,  wife  or  widow  of  a 
son,  or  the  husband  of  a  daughter,  or  an  adopted  child,  the  rate 
of  the  tax  is  only  one  per  cent.  It  is  therefore  obvious  that  it  will 
not  in  any  such  case  prove  a  heavy  burden.  It  will  be  most  re- 


HERTIG    ON    TAXATION.  253 

munerative  when  applied  to  other  classes  of  beneficiaries,  for 
then  a  tax  of  five  per  cent  will  be  imposed.  No  sound  reason  can 
be  urged  for  imposing  a  tax  in  such  cases,  below  the  constitu- 
tional limit  of  five  per  cent.  It  has  been  well  said  that  "the  ex- 
tension of  intestate  succession  to  collateral  relations  is,  under  ex- 
isting social  conditions,  defensible  only  to  a  very  limited  extent/1 
Seligman,  Essays  in  Tax,  124.  The  soundest  reasons  of  public 
policy  justify  a  much  heavier  tax  when  estates  descend  to  col- 
lateral than  when  they  descend  to  direct  relations. 

After  pronounced  popular  approval  of  this  method  of  taxation 
and  repeated  action  by  the  legislature  upon  the  subject,  it  is  now 
unnecessary  to  discuss  the  wisdom  of  its  adoption." 

Mention  has  been  made  above  (p.  246)  of  the  fact  that,  except 
as  defaced  by  certain  unfortunate  amendments,  the  tax  commis- 
sion's code  in  so  far  as  it  relates  to  the  taxing  of  inheritances 
has  become  the  law  of  Minnesota. — Laws  of  1902,  chapter  3, 
(House  File  No.  57).  If  the  story  of  the  short-lived  Jacobson 
amendment  (pp.  235-238),  buried  with  the  code  to  which  it  was 
affixed,  affords,  by  reason  of  its  eventual  harmlessness,  a  purely 
comic  illustration  of  the  folly  and  danger  lurking  in  our  hasty 
amendments, — "House  File  Number  57"  affords  a  typical  ex- 
ample of  the  like  danger  carried  to  serious  consequences,  and  ac- 
tually working  grave  mischief  in  the  statute  book.  The  ex- 
ample is  all  the  more  striking  in  that  it  is  furnished  by  the  graver 
and  more  deliberate  senate.  "House  File  Number  57"  was 
reached  in  that  body  "on  Special  Orders"  in  the  afternoon  of 
March  loth,  the  last  day  but  one  of  the  session,  and  the  last  day 
on  which  any  bill  could  have  been  lawfully  passed.  The  senate 
then  and  there  hurriedly  adopted  five  amendments,  no  one  of 
which  was  really  necessary,  and  three  of  which  did  no  harm. 
Schellbach  (Rep.)  of  Yellow  Medicine  offered  an  amendment 
which  improved  the  phraseology  of  the  bill  by  substituting  the 
words  "legally  adopted"  for  the  cumbrous  but  letter-perfect 
"adopted  as  such  in  conformity  with  the  laws  of  this  state." 
Snyder  (Rep.)  of  Hennepin  offered  one  which  softened  the  time 
provisions  by  changing  "six  months"  into  "one  year."  Brower 
(Rep.)  of  Stearns  offered  one  extending  the  pale  of  near  rela- 
tions who  -pay  a  diminished  tax  so  as  to  include  "grandchild, 
nephew  or  niece."  This  is  creditable  to  the  senator's  heart,  and 
invites  no  criticism  from  the  head.  This  finishes  the  senate 
amendments  that  bear  no  serious  consequence.  The  senator  from 
Stearns  made  what  has  proved  to  be  the  serious  mistake  of  offer- 
ing the  two  other  amendments.  When  a  legislator  of  Brewer's 
ability,  caution  and  zeal  in  the  service  of  the  people,  makes  such 
eleventh  hour  slip, — the  example  ought  to  inspire  all  good  legisla- 


254  HERTIG     ON     TAXATION. 

tors  with  double  caution  against  adopting  amendments  without 
deliberation,  when  the  gavel  is  about  to  fall.  The  example  is  fur- 
ther intensified  by  an  unintended  and  unforeseeable  result,  by 
which,  as  it  seems,  "House  File  57"  is  rendered  unconstitutional. 
I  will  explain :  In  the  laws  of  1902,  as  printed,  a  tax  of  10  per  cent 
of  the  amount  so  distributed  is  put  on  legacies,  or  shares  in  estates 
going  to  collateral  relatives,  whereas  the  constitution  limits  the 
maximum  to  5  per  cent.  As  I  write  (May  23)  it  is  stated  in  the 
daily  press  that  "Judge  Bazille,  of  the  probate  court  of  Ramsey 
county"  has  refused  to  appoint  appraisers  for  the  estate  of  the 
late  Emerson  W.  Feet,  for  that  the  inheritance  tax  law  is  uncon- 
stitutional because  of  "an  amendment  adopted  last  winter"  in 
"contravention  of  the  constitutional  amendment  of  1894  which 
fixes  the  maximum  tax  at  5  per  cent."  And  in  explanation 
thereof  the  press  quotes  that  level-headed  representative,  W.  B. 
Anderson  (Rep.),  of  Winona,  as  saying  that  "the  amendment 
which  nullifies  the  inheritance  tax  law  was  slipped  into  the  bill  in 
the  senate  and  in  the  rush  of  business  on  the  last  day,  the  uncon- 
stitutional feature  was  not  noticed." 

At  any  rate,  when  the  senate  amendments  were  adopted,  the 
bill  was  sent  to  the  house  with  the  request  that  it  concur  therein ; 
and  as  the  very  last  thing  that  the  house  did  except  to  refer  a  bill 
of  seventy-five  dollars  and  to  adjourn  for  the  fun,  horse-play  and 
no  business  of  the  next  and  last  day — was  to  vote  "on  the  re-pas- 
sage of  the  bill  as  amended,"  it  was  so  re-passed  and  without 
deliberation,  by  yeas  83  and  nays  2, — the  latter  being  Hickey 
(Dem.)  of  Ramsey,  and  Rider  (Pop.)  of  Otter  Tail. 

Now  the  two  fatal  Brower  amendments  tend  indeed  to  spoil 
the  bill  as  a  revenue  producer;  but  except  as  error  of  the  clerks 
may  have  that  effect,  they  do  not  render  it  unconstitutional.  The 
bill,  as  first  passed  by  the  house  did  not  embody  the  tax  commis- 
sion's recommendation  to  tax  all  inheritances  of  a  value  exceeding 
$1,000.00  upon  their  excess  in  value  above  that  sum,  but  in  lieu 
of  $1,000  as  the  exemption  limit,  fixed — unwisely,  as  I  believe — 
that  limit  at  $5,000.00.  The  house  'also  had  further  damaged  the 
bill  as  a  revenue-yielder  by  taxing  legacies  going  to  near  rela- 
tions at  one-half  of  i  per  cent.,  instead  of  the  I  per  cent,  recom- 
mended by  the  commission.  Brower  s  two  amendments,  as  per 
the  official  journal  of  the  senate  of  March  loth,  by  twice  substi- 
tuting "ten"  for  "five", — once  in  section  i,  and  once  in  the  "last 
line"  of  section  2, — merely  raise  the  $5,000  exemption,  just  men- 
tioned, of  the  house  to  the  final  senatorial  exemption  of  $10,000. 
The  fatal  and  unconstitutional  "10  per  centum"  appears  indeed 
in  section  2,  but  is  not  in  the  "last  line"  of  said  section ;  hence 
while  it  must  have  got  in  as  a  result  of  the  Brower  amendment  it 


HERTIG     ON     TAXATION.  255 

must  also  have  got  in  by  error  of  the  engrossing  clerk  or  other 
error;  only  one  "ten"  is  substituted  for  one  "five,"  in  section  2.  by 
the  B rower  amendment,  •  and  that  in  the  "last  line,"  whereas 
in  the  law  as  printed,  two  "tens"  are  substituted  in  section  2.  for 
the  like  number  of  "fives,"  one  of  which  stood  before  "thousand" 
in  the  "last  line,"  and  one  before  "per  centum"  in  a  preceding- 
line. 

I  now  discuss  the  Brower  amendments  in  their  natural  and 
foreseeable  results.  The  exemption  from  inheritance  tax,,  as  is 
well  pointed  out  by  the  commission,  does  not  attach  to  the  estate 
as  a  whole,  but  attaches  separately  to  each  bequest  or  legacy  that 
may  be  carved  out  of  any  decedent's  estate.  It  follows,  therefore, 
taking  for  example  an  estate  of  $50,000,  to  be  divided  amongst 
five  heirs,  that  out  of  such  estate  so  divided,  the  state  of  Minne- 
sota, under  "House  File  Number  57"  as  finally  passed  would 
receive  no  inheritance  tax  whatever.  Such  large  exemption  loses 
literally  a  golden  occasion  to  extend  the  practical  scope  of  Ben- 
tham's  maxim,  "All  taxes  ought  to  be  taxes  upon  affluence."  If 
the  near  relatives  of  him  who  leaves  an  estate  aggregating  even  no 
more  than  $20,000  a/e  not  better,  far  better,  fitted  to  take  a  win- 
ning part  in  the  "struggle  for  existence"  than  the  average  "father, 
mother,  husband,  wife,  child,  brother,  sister,  grandchild,  nephew 
or  niece,"  etc.,  for  each  and  every  one  of  whom,  and  for  as  many 
of  them  as  share  in  any  one  estate,  "House  File  57"  now  exempts 
$10,000  from  inheritance  tax, — if,  I  repeat  the  near  relatives  of  a 
decedent  whose  whole  estate  amounts  to  no  more  than  $20,000  are 
not  better  equipped  for  life's  struggle  than  the  average  person 
who  has  no  present,  no  immediate,  and  probably  no  prospective, 
interest  in  an  estate  in  probate  or  to  be  probated, — then,  in  the 
great  majority  of  cases,  it  is  because  such  near  relatives  have 
neglected  the  good  opportunities  generally  afforded  to  them  in  the 
circle  in  which  their  decedent  moved.  The  Local  Hog  and  the 
Skinflint  proper,  in  villages  and  small  cities,  seldom  acquire  great' 
wealth.  But  all  things  go  by  comparison,  and  they  are  rich  for 
their  time  and  place.  When  in  the  course  of  nature,  they  pass 
into  the  category  of  decedents,  their  estates  are  found  to  be  quite 
moderate,  measured  by  the  standard  of  wealth  in  large  cities  and 
by  the  standard  of  "House  File  57."  Yet  such  decedents  are  cer- 
tainly of  the  righteous  who  in  their  lifetime  are  never  seen  "for- 
saken, or  their  seed  [at  any  time]  begging  bread."  Such  deced- 
ents were  very  often,  if  not  always,  the  typical  tax-dodgers  in  the 
respective  places  where  they  lived.  A  business  man  from  one  of 
our  smaller  cities  was  talking  with  me  last  winter  about  the  dras- 
tic features  of  the  tax  commission's  now  buried  code.  "Tom 
— ,"  said  he,  mentioning  the  typical  skinflint  in  his  town, 


356  HERTIG    ON    TAXATION. 

would  swear  a  hole  through  boiler  iron,  before  he'd  'cough  up' 
his  money  and  notes  for  taxation."  When  Tom  dies,  let  the  state 
come  at  least  partially  into  its  own ;  it  will  not  do  so,  as  House 
File  57  now  stands ! 

Rome,  under  the  Caesars,  had  an  inheritance  tax ;  but  Bentham 
may  be  safely  put  down  as  the  father  of  it  in  its  modern  form. 
Under  the  title  of  Supply  Without  Burden,  or  Escheat  VICE  Tax- 
ation, Bentham  published  in  1795,  a  pamphlet  printed  in  1793,  but 
withheld  for  a  time  from  the  public.  It  is  of  advantage  to  com- 
pare the  masterly  boldness  of  the  original  with  the  timidity  of  the 
remote,  and  often  of  their  source  unconscious,  copies  which  do 
duty  in  the  American  states  as  inheritance  tax  laws.  I  restate 
in  my  own  words,  except  as  indicated  by  quotation  marks,  the 
main  propositions  of  Bentham,  neglecting  those  relating  to  en- 
tails, the  property  of  peers,  etc.  These  propositions  are : 

1.  Appropriate  "to  the  use  of  the  public  all  vacant  succes- 
sions, property  of  every  denomination  included,  on  the  failure  of 
near  relations,  subject  only  to  the  power  of  bequest,  as  herein- 
after limited."    [Near  relations  in  Bentham's  sense  mean  those 
"within  the  degrees  termed  prohibited,"  that  is  those  with  whom 
the  decedent  could  not  have  lawfully  intermarried.] 

2.  Near  relatives  childless,  and  without  prospect  of  children, 
for  example  females  aged  48 ;  males  aged  60,  if  to  such  male  no 
child  shall  have  been  born  in  the  five  years  last  preceding  the 
distribution  of  his  decedent's  estate;  and  males  aged  55,  if  mar- 
ried to  a  wife  above  48, — all  these,  in  lieu  of  absolute  title  to  their 
share  of  the  estate,  shall  enjoy  such  share  "in  the  shape  of  an 
annuity    for   life."      [Such   annuity,    if   the   proposition   were  to 
become  law  in  the  American  states,  would  be  the  annual  income 
of  the  value  of  such  share  as  measured  by  the  current  rate  at 
which  the  state  could  borrow  money.  The  state,  as  residuary  own- 
er of  the  legacy  would,  of  course,  pay  to  such  childless  beneficiary 
such  annual  income  during  the  remainder  of  his  or  her  life.] 

3.  As  an  appropriate  "farther  help"  to  the  state,  claimants  of 
estates,  though  claiming  as  "near  relations"  should  be  required  to 
divide  their  shares  equally,  one-half  to  them  and  one-half  to  the 
state,  where  such  claimants  are  not  likely  to  have  grounded  their 
plans  of  life  "upon  the  expectation  of  the  succession" — as  if  they 
stand  to  the  decedent  in  the  relation  of  uncle  or  aunt,  grand- 
father or  grandmother,  or  "perhaps"  nephew  or  niece. 

4.  Modify  the  power  of  bequest  or  disposition  of  property 
by  will,  so  that  testators  shall 'have  the  right  only  to  so  dispose 
"of  the  half  of  whatever  property  would  be  at  present  subject  to 
that  power."     Wills  under  such  a  law,  if  they  should  purport  to 
dispose  of  all  the  testator's  property,  or  should  by  any  artifice  at- 


HERTIG    ON     TAXATION.  257 

tempt  such  entire  disposition,  would  be  so  construed  as  to  give 
effect  to  the  will  pro  tanto,  that  is,  make  it  valid  to  dispose  of  half 
the  testator's  property,  cutting  all  legacies  in  two — half  to  the 
heirs,  half  to  the  state. 

Bentham's  plan  of  administration  was  to  convert  the  whole 
fund  in  which  the  state  should  become  thus  interested,  into  cash. 
An  officer  of  the  crown  [here  a  state  officer]  should  manage  from 
the  outset  any  estate  in  which  the  public  should  be  co-heir. 

"Many  writers  (Blackstone  for  one),"  remarks  Bentham's 
editor,  "have  treated  the  right  of  bequest  with  very  little  cere- 
mony ;  many  writers,  without  having  in  view  such  public  benefit 
as  is  here  in  question,  have  been  for  abolishing  it  altogether."  He 
mentions,  as  one  of  these,  "the  author  of  the  code  Frederic, 
*  *  *  chancellor  to  the  late  King  of  Prussia." 

The  Jacobson  bill,  "House-  File  56"  mentioned  early  in  this 
chapter  as  having  been  rushed  through  the  House  only  to  be  killed 
in  the  Senate,  deserves  further  mention.  Around  it  clustered  the 
hopes  of  those  who  have  a  keen  consciousness  of  the  injustice  that 
grows  out  of  pre-empted  and  prestolen  opportunities,  but  who  will 
pardon  me,  I  think — if  they  read  this  book  through — for  saying 
that  they  set  about  redressing  such  injustice  in  a  blind  and  blun- 
dering way.  The  Jacobson  bill  adopted  in  substance  those  fea- 
tures of  the  commission's  rejected  code  which  relate  to  public 
service  corporations  and  the  creation  of  a  permanent  tax  com- 
mission— with  slight  administrative  changes  to  allow  for  the  fact 
that,  as  contemplated  by  it,  there  would  be  no  state  board  of  re- 
view and  no  county  supervisor  of  assessments.  An  original  fea- 
ture of  the  bill  was  a  provision  for  laying  a  tax  of  5  cents  "upon 
each  gross  ton  of  iron  ore  hereafter  mined  during  any  year  in  this 
state,  which  tax  shall  be  in  lieu  of  all  other  taxes  upon  such  ores 
and  the  property  actually  and  necessarily  employed  in  the  pro- 
duction thereof," — the  revenue  yielded  by  such  tax  to  be  distri- 
buted "between  the  county  and  the  state  in  the  same  proportion  as 
the  proceeds  of  taxes  upon  real  estate  are  distributed." 

In  commenting  upon  Purdy's  speech  I  quoted  (p.  229,  supra), 
the  basis  laid  down  by  the  commission  in  its  proposed  code,  sec. 
83,  for  ascertaining  the  taxable  value  of  franchises.  This  which 
is  the  heavy  ordnance  of  one  win^  of  radical  tax  reformers,  was 
also  the  heavy  piece  in  the  Jacobson  battery.  No  large  body  of 
voters  seemed  ready  to  cry  out  against  taking  any  sort  of  a  shot 
at  franchises.  Indeed,  in  one  sense,  to  fire  and  miss  is  to  play  a 
better  game  than  to  fire  and  hit.  In  practical  politics,  the  firing 
•shows  good  intent,  and  the  blame  for  missing:  can  g^enerallv  be 
laid  on  some  one  else.  Besides,  the  enemy  so  fired  at  and  missed 


258  HERTIG     ON     TAXATION. 

may  find  it  expedient  to  remain  neutral  about  election  day  for  fear 
of  more  effective  shot  next  time. 

One  limitation  on  the  effectiveness  of  the  Jacobson  battery 
resulted  from  giving  it  a  hampering  ally  in  the  proposed  tonnage 
tax  on  ore.  This  insured  the  opposition  of  the  Duluth  delegation, 
and  in  the  end  of  various  senators  from  other  districts  on  the 
twofold  ground  that  such  tonnage  tax  is  of  spurious  or  doubtful 
constitutionality,  and  that  the  residents  of  the  iron  district,  where 
alone  it  would  apply,  are  opposed  to  it.  In  its  rapid  passage 
through  the  House,  the  tonnage  tax  was  signaled  as  a  thrust  at  the 
United  States  Steel  Corporation,  commonly  known  as  the  "steel 
trust."  The,  Minneapolis  Times  of  March  i,  describing  its  pas- 
sage by  the  House,  said :  "The  tonnage  tax  provision  was  fought 
by  the  iron  and  steel  lobby" — but  without  mentioning  the  home 
or  personnel  of  such  lobby.  Jacobson  who  jammed  his  bill 
through  the  House  between  10:30  a.  m.  and  4  p.  m.,  February 
28th,  said  among  other  things  in  the  vehement  arguments  with 
which  he  supported  it:  "I  introduced  this  bill  to  show  where  the 
opposition  to  tax  reform  comes  from.  It  comes  from  the  public 
service  corporations,  and  from  the  great  steel  trust,  fighting  be- 
hind pretended  sympathy  for  widows  and  orphans,  workingmen 
and  small  depositors,  and  in  behalf  of  'the  poor  farmers.'  They 
could  fight  under  that  cover  a  few  days  ago,  when  'House  File 
Number  One'  was  on ;  they  can't  do  it  under  this  bill.  You  were 
not  honest  when  you  fought  this  way,  and  your  vote  now  will 
prove  it.  My  bill  will  not  hurt  the  farmer  or  drive  the  elevators 
out  of  Duluth,  and  you  can't  hide  under  cover  of  that  argument. 
You've  got  to  come  out  in  the  open  and  fight  fair.  The  tonnage 
tax  will  remove  the  mines  from  local  authorities,  and  justice  will 
never  be  secured  until  they  are  so  removed."  He  took  flat  issue 
with  his  former  friend  State  Auditor  Dunn  who  opposed  the  pro- 
posed tonnage  tax  and  favored  assessing  the  mines  on  an  ad- 
valorem  basis ;  was  confident  that,  if  this  his  bill  should  become 
law,  the  increased  revenues  from  it  and  the  raise  of  the  gross 
earnings  tax  on  railroads  to  four  per  cent,  successfully  cham- 
pioned by  him  the  previous  winter — would  enable  the  state  to  take 
care  of  its  institutions  and  pay  the  running  expenses«of  state  gov- 
ernment without  levying  in  the  counties  a  single  dollar  of  taxes 
for  the  state  treasury. 

Laybourn  of  Duluth,  led  the  opposition  to  the  bill.  His  chief 
proposition  was  that  the  tonnage  tax  would  be  a  heavy  and  unjust 
blow  against  St.  Louis  county  and  its  leading  industry,  the  min- 
ing of  iron  ore.  He  pointed  out  the  newness  of  this  industry  and 
the  recent  birth  of  the  immense  values  that  now  attach  to  many 
of  the  iron  properties.  A  very  handsome  increase  in  assessed 


HERTIG     ON     TAXATION.  259 

values  had  been  made  at  the  last  assessment  in  1900,  and  he  in- 
doised  the  statement  and  prediction  of -State  Auditor  Dunn  that  at 
the  next  assessment  the  coming-  summer,  the  value  of  the  iron 
mines  would  be  fixed  at  around  $30,000,000,  a  very  good  valua- 
tion as  compared  with  other  real  estate  properties.  Besides,  the 
tax  commissioners  in  their  Report,  p.  43,  had  failed  to  recommend 
a  tonnage  tax  because  of  its  doubtful  constitutionality,  and  most 
lawyers  were  flatly  of  the  opinion  that  such  tax  would  be  held 
unconstitutional.  Moreover,  many  towns  with  flourishing  schools 
have  been  built  up  out  of  the  iron  industry.  Their  chief  revenue 
is  derived  from  an  cud  valorem  tax  on  mines.  Impose  a  tonnage 
tax,  and  it  immediately  becomes  discretionary  with  the  mine 
owners  to  shut  down  their  mines,  and  so  the  product  ceasing,  local 
revenues  from  taxes  would  cease.  As  it  is  now,  iron-mine  owners 
must  pay  a  fixed  tax  according  to  each  biennial  assessment,  and 
people  living  in  the  iron  districts  know  that  this  revenue  is  cer- 
tain and  sure.  They  know  that  with  it  they  can  maintain  their 
schools  and  raise  other  needed  local  revenues.  St.  Louis  county 
had  done  her  share  in  yielding  revenue  to  the  state  treasury — 
more  than  her  share  in  fact;  and  here  Laybourn  made  an  ex- 
haustive statistical  showing  on  that  proposition.  "Certainly,"  he 
urged,  "St.  Louis  comity  deserves  a  full  hearing  and  fair  treat- 
ment at  the  hands  of  the  state." 

ROBERTS  :  "Just  here  is  where  the  gentleman  from  St.  Louis 
county  differs  from  the  rest  of  this  House.  We  have  got  to  look 
upon  St.  Louis  county  as  a  rotten  pocket  borough  which  is  owned, 
with  all  of  its  public  officials  by  the  United  States  Steel  trust." 
(Laughter  and  applause.) 

LAYBOURN  :  "The  gentleman  from  Hennepin  impugns  the 
standing  of  every  person,  who  lives  in  St.  Louis  county.  I  de- 
nounce as  untrue  and  unjust  the  statement  that  the  LTnited  States 
Steel  trust  owns  St.  Louis  county." 

JOHNSON  of  Hennepin :  "How  much  property  does  the  steel 
trust  own  in  St.  Louis  county?" 

LAYBOURN  :     "I  do  not  know." 

JOHNSON:  "I  know  one  thing;  in  my  bridge  business  I've 
got  to  pay  the  trust  twice  as  much  for  iron  and  steel  as  was  paid 
before  the  trust  was  organized.  This  charge  is  based  on  whole- 
sale watering  of  stock,  and  now  I  want  to  know  how  much  of  our 
state  is  owned  by  this  enormous  trust.  I  propose  now  to  vote 
for  this  bill  in  order  to  reach  this  great  trust." 

More  than  one  member  associated  St.  Louis  county  and  the 
steel  trust  top-ether,  and  assumed  that  what  one  wanted  meant 
what  both  wanted.  Dobbin  of  Hennepin,  took  the  reasonable 


260  HERTIG     ON     TAXATION. 

ground  that  it  is  right  in  principle  to  tax  the  income  and  earnings 
of  corporations,  and  hence  supported  the  bill.  He,  however, 
failed  to  allow  for  the  special  facts  which  militate  against  a  ton- 
nage tax  on  Minnesota's  iron  mines — facts  brought  out  with  over- 
whelming force  in  the  arguments  before  the  Senate  and  its  com- 
mittee. Armstrong  of  Hennepin,  in  supporting  the  bill,  men- 
tioned as  a  fact  needing  the  special  attention  of  the  legislature 
that  the  gas  company  of  Minneapolis,  pockets  dividends  on  $800,- 
ooo  of  stock  and  interest  coupons  on  .$3,000,000  of  bonds.  The 
debate  was  further  enlivened  by  remarks  of  Jacobson,  growing  out 
of  a  personal  tilt  with  State  Auditor  Dunn.  That  officer's  fiscal 
policy  is  opposed  to  the  tonnage  tax,  and  had  been  expressed  with 
great  vigor,  and  with,  for  some,  convincing  weight.  Jacobson 
did  not  attack  Dunn's  character.  "I  have,"  he  said,  "the  utmost 
respect  for  State  Auditor  Dunn,  and  he  is  entitled  to  a  great  deal 
of  credit  for  a  great  many  things  that  he  has  done."  But  his  at- 
tack was  rather  along  the  line  of  laurel-clipping  than  laurel- 
stripping.  ''Many  of  the  reforms,"  said  Jacobson,  "for  which 
Dunn  now  claims  credit  were  enacted  not  by  his  help,  but  in  spite 
of  his  opposition."  Jacobson  was  in  fact  paving  the  way  for  his 
own  candidacy  to  the  office  of  state  auditor ;  and  while  Dunn  had 
given  out  that  he  would  not  stand  as  a  candidate  for  re-election, 
it  was  known  that  he  would  use  his  strength  in  favor  of  one  of  his 
deputies.  Both  of  these  gentlemen  are  good  men,  and  have 
sturdy  characters.  Neither  one  of  them  would  fail  to  carry  out 
the  people's  mandates,  to  the  extent  that  the  same  should  be 
clearly  given  to  either  to  execute.  But  in  those  tangled  thickets 
through  which  the  people's  will  has  not  yet  cut  clear  paths,  each, 
on  his  own  account,  is  likely  to  do  energetic  and  somewhat  gro- 
tesque, though  entirely  pardonable,  grubbing.  Enlightened  men- 
tion of  the  personal  bias,  so  apt  to  cloud  'great  issues,  is  always  in- 
structive to  the  reader,  to  say  nothing  of  the  advantage  it  may  be 
to  the  actors  and  their  constituents. 

The  ingenious  Laybourn  nagged  Jacobson  with  a  motion  for 
a  recess  of  fifteen  minutes  and  the  floor  of  the  House  to  State 
Auditor  Dunn  meantime,  to  make  a  counter-argument  on  the 
tonnage  tax. 

JACOBSON  :  "In  place  of  a  recess  to  allow  Dunn  or  any  other 
man  a  chance  to  take  up  our  time,  I  shall  move  the  previous  ques- 
tion !" 

LAYBOURN  :  "That  shows  the  high-handed  methods  of  the 
author  of  this  bill.  He  admits  the  weakness  of  his  case  when  he 
refuses  to  give  the  state  auditor  a  hearing." 

JACOBSON  :  "We  shall  vote  this  bill  up  or  down  here  and  now, 
if  we  have  votes  enough  to  do  it ;  and  as  to  State  Auditor  Dunn, 


HERTIG    ON    TAXATION.  261 

[fairly  shouting]  we  will  settle  our  hash  outside  of  this  house." 
[Laughter  and  applause.] 

This  wrangle  ended  in  Laybourn  dropping  his  motion  for  a 
recess  and  Jacobson  his  motion  to  move  the  previous  question ; 
and  the  debate  continued  to  a  later  hour  in  the  day. 

Jacobson  in  closing  his  argument  on  the  bill,  warmed,  as  a 
Minneapolis  Times  reporter  expressed  it,  to  "a  red-hot  roast  on 
the  iron  ore  interests  of  St.  Louis  county."  With  voice  raised 
"to  the  highest  pitch,  he  shouted" : 

"They  are  robbing  the  state  of  our  wealth.  When  they  have 
taken  away  the  iron  ore,  all  we  have  left  is  a  h^ole  in  the  ground. 

"I  admit  that  the  real  estate  taxes  on  the  farming  interests  are 
not  what  they  ought  to  be,  [that  farms  are  assessed  too  low]  ; 
but  I  tried  my  damnedest  a  few  days  ago  to  rectify  it  by  passing 
the  tax  code,  which  this  House  voted  down.  [Great  laughter.] 
You  vote  this  bill  up  or  down  now,  and  you  make  for  yourselves 
a  record  that  can  never  be  rubbed  out." 

The  bill  was  then  put  to  vote,  the  roll  was  called  and  "there 
were  yeas  84  and  nays  25."  The  nay  votes  were  given  by : 

Alford  (Rep.),  Barteau  (Rep.),  Berg  (Rep.),  Bury  (Rep.), 
Dunn  (Rep.),  Ferris  (Rep.),  Fust  (Dem.),  Gainey  (Dem.), 
Hemsted  (Dem-Peop.),  Hickey  (Dem.),  Hillory  (Rep.),  Holm 
(Rep.),  Hurd  (Rep.),  Laybourn  (Rep.),  Miller  ("Rep.),  Neu- 
bauer  (Rep.),  Noyes  (Rep.),  Ocobock  (Rep.),  Phillips  (Rep.), 
Plowman  (Pop.)/Pugh  (Rep.),  Rich  (Rep.),  Sikorski  (Dem.), 
Smith  (Rep.),  Wilcox  (Rep.), — 19  Republicans  and  six  non- 
Republicans.  Mallory  (Rep.),  of  the  Duluth  delegation  was  un- 
avoidably absent,  but  would  have  voted  against  the  bill.  Others 
absent  were  Dagget  (Dem.),  sick,  and  Lane,  Mark,  G.  Peterson, 
Potter,  Ryan,  Schurman  and  Washburn,  ("Republicans). 

It  was  now  (March  i)  "up  to"  the  Senate  to  show  its  colors 
in  the  matter  of  taxation.  It  had  been  leisurely  and  properly 
awaiting  the  action  of  the  House,  meantime  laboring  through  its 
own  committee  on  taxation  and  its  judiciary  committee  to  fit  it- 
self with  satisfactory  views  on  the  whole  subject,  including 
amendments  to  the  constitution.  It  was  evident  from  the  outset 
that  the  Senate  would  not  imitate  the  House  and  jam  the.  bill 
through.  It  was  said,  that  some  members  of  the  House  who 
voted  for  the  bill  felt  that  they  had  been  over-hasty  in  railroading 
through  so  important  a  measure  in  three  and  a  half  hours.  True 
the  franchise  tax  and  the  creation  of  a  permanent  tax  commission 
had  been  considered  before,  but  the  tonnage  tax  was  entirely  new. 
They  had,  from  some  quarters,  to  endure  the  jibe  of  having  so 
feared  that  they  would  have  nothing  to  show  for  the  session's 


362  HERTIG    ON     TAXATION. 

work  that  at  the  crack  of  JacobsorTs  whip  "they  hurried  into  line 
like  a  herd  of  frightened  cattle." 

When  the  bill  was  reported  to  the  Senate,  Thompson  (Rep.), 
of  Fillmore,  moved  that  the  rules  be  suspended,  the  bill  placed 
upon  general  orders,  and  discussed  immediately  in  committee  of 
the  whole.  Baldwin  (Dem.),  of  Duluth,  promptly  and  vigor- 
ously objected,  dwelling  with  special  emphasis  on  the  doubtful 
constitutionality  of  the  bill,  the  certainty  that  collection  of  the  ton- 
nage tax  would  be  contested  on  that  account,  and  the  disaster 
to  St.  Louis  county  for  it  to  have  tied  up  its  chief  item  of  taxes 
for  several  years  pending  the  decision  on  constitutionality. 
Dougherty  (Rep.),  of  Duluth,  and  McKusick  (Rep.),  of  Pine, 
took  the  floor  in  support  of  Baldwin's  protest.  McCarthy 
(Rep.),  of  Itasca,  avowing  that  he  favored  the  bill  and  was  ready 
now  to  vote  on  it,  took  the  judicious  ground  that  as  regarded  the 
tonnage  tax  there  was  a  principle  of  local  self-government  at 
stake ;  that  it  was  due  to  the  members  from  St.  Louis  county  in  a 
matter  of  such  far-reaching  importance  to  their  locality  to  give 
the  bill  deliberate  consideration  and  not  rush  it  through.  Cour- 
tesy would  require  this,  even  were  there  no  deeper  principle  in- 
volved. Somerville  (Rep.),  of  Brown,  supporting  also  Bald- 
win's protest,  took  the  ground  that  in  any  event,  the  bill  needed 
recasting ;  that  not  the  tonnage  tax  alone  needed  careful  consider- 
ation, but  also  the  tax-commission  provisions  of  the  bill ;  that  the 
bill  as  rushed  through  the  House  virtually  imposed  upon  its  pro- 
posed tax  commissioners  no  duties  except  the  drawing  of  their 
salaries.  That  earnest,  but  not  fanatic,  tax  reformer,  Snyder 
(Rep)-,  of  Hennepin,  favored  referring  the  tonnage-tax  portion 
of  the  bill  to  the  judiciary  committee,  and  urged  that  the  other 
portions  of  the  bill  be  considered  in  committee  of  the  whole. 
Horton  (Rep.),  of  Ramsey,  made  a  vigorous  and  spirited  attack 
upon  the  bill  as  a  whole  and  upon  its  details ;  upon  it  as  violating 
the  spirit  and  intent  of  the  real  purpose  for  which  the  special  ses- 
sion had  been  called,  upon  it  as  a  personal  bill  to  launch  a  personal 
boom ;  upon  it  as  purporting  to  crack  a  loving  paternal  whip 
over  one  of  the  largest  of  St.  Louis  county's  interests,  yet  not 
in  fact  for  love  of  St.  Louis  county,  but  in  the  hope  that  the  noise 
of  the  whip  would  be  greeted  with  noisier  applause  ;  upon  it  as  in 
fact  a  once-killed  bill  which  no  parliamentary  body  ought  now  to 
let  stalk  about  in  its  grave  clothes  and  the  added  trappings  of  a 
faked  resurrection  ;  upon  a  bill  whose  many  outrageous  and  unjust 
provisions  could  be  matched  only  by  the  now  proposed  procedure 
of  rushing  it  through  this  Senate  with  less  consideration  than  that 
given  to  a  dog-tax  bill.  Ives  (Dem.),  of  Ramsey,  the  humorist 
of  the  Senate,  objected  to  giving  this  bill  the  cruel  but  not  unusual 


HERTIG    ON    TAXATION.  263 

treatment  of  whip  and  spur.  To'  push  on  the  lines,  he  thought, 
would  just  suit  the  constitution  of  the  bill,  and  might  save  it  from 
a  part  of  the  jar  it  would  surely  experience  should  it  ever  get  on 
far  enough  to  stack  up  against  the  constitution  of  the  state.  Be- 
sides he  believed  in  fair  play.  He  had  noticed  that  whenever  a 
bill  came  up  from  the  House  bearing  a  certain  hall-mark,  it  was 
always  pressed  to  go  on  special  orders,  and  be  jockeyed  through 
with  whip  and  spur.  What  was  the  matter  with  rotation  in  rough- 
riding?  Sheehan  (Rep.),  of  Ramsey,  capped  the  wit  of  his  Dem- 
ocratic colleague  by  stating  that  he  understood  the  creamery  peo- 
ple felt  slighted  that  their  butter-  output  was  not  included  in  the 
five  cent  tonnage  tax,  and  that  they  wanted  a  hearing.  Knatvold 
(Rep.),  of  Freeborn,  believing  that  the  virtue  which  hesitates  is 
lost,  favored  immediate  action.  "If,"  said  he,  "the  bill  is  held  up 
here  a  week,  there  won't  be  a  shred  of  it  left."  "Why  not?"  cried 
a  number  of  senators. 

SCHALLER  (Dem.),  of  Dakota:  "Isn't  this  Senate  honest 
enough  to  pass  the  right  kind  of  bill  next  week  ?" 

KNATVOLD  :     "A  few  days'  delay  has  killed  many  a  bill." 

BALDWIN  :  "The  gentleman  from  Freeborn  has  attacked  the 
honesty  of  this  body.  It  seems  to  me  that  he  has  nearly  tran- 
scended the  limit." 

KNATVOLD:  "I  have  not  attacked  the  honor  of  the  Senate. 
I  only  meant  that  enough  votes  might  be  bought  to  defeat  a  bill : 
such  things  have  happened." 

McGovERN  (Dem.),  of  Waseca,  thought  the  tonnage  tax  sec- 
tions should  go  to  the  judiciary  committee  for  a  formal  report  as 
to  their  constitutionality.  For  himself,  they  were  clearly  uncon- 
stitutional. 

WILSON  (Rep.)  of  Hennepin :  "It  may  be  conceded  that  the 
tonnage-tax  sections  are  of  doubtful  constitutionality ;  but  courts 
still  adhere  to  the  familiar  legal  principle  that  where  in  doubt 
whether  a  statute  is  or  is  not  constitutional,  they  resolve  that  doubt 
in  favor  of  the  statute  and  uphold  the  same." 

Finally,  on  the  substitute  motion  of  Snyder,  the  bill  was  re- 
ferred to  the  tax  committee,  with  instructions  to  report  not  later 
than  March  5th.  This  committee  held  well-attended  public  hear- 
ings on  March  3d  and  4th,  when  a  number  of  speakers  discussed 
the  franchise  and  tonnage  tax  features  of  the  bill. 

State  Auditor  Dunn  was  the  first  speaker  at  these  hearings, 
and  naturally  opposed  the  bill — his  opposing  views  on  the  tonnage 
tax  being  already  well  known.  "This  feature,"  he  said,  "is  clear- 
ly unconstitutional.  The  bill  is  wrong  in  principle,  and  violates 
the  mandates  of  the  constitution  that  all  taxation  shall  be  as  near- 
ly equal  as  may  be." 


264  HERTIG    ON     TAXATION. 

''When,  some  two  weeks  ago,"  he  said  further,  "I  appeared 
before  the  tax  committee  of  the  House,  I  did  not  quite  speak  my 
full  mind.  I  should  have  liked  to  say,  and  think  now  I  ought  to 
have  said:  'Pass  the  real  estate  provisions  of  the  tax  commis- 
sion's bill,  drop  the  rest  of  it,  pass  some  constitutional  amend- 
ment, and  then,  for  God's,  sake — go  home!'  [These  real  estate 
provisions  are  embodied  in  the  Anderson  bill  ''House  File  58," 
duly  passed  as  said  above.]  Friends  of  the  tax  code,  however, 
dissuaded  me  from  coming  out  against  any  particular  features  of 
the  bill.  I  felt  that  if  out  and  out  tax  reform  is  to  come,  it  must 
come  through  a  legislature  elected  on  that  isssue.  [A  very  saga- 
cious remark.]  When  the  tax  code  of  the  commission  was  draft- 
ed and  shown  to  me,  I  told  my  friends  that  it  would  not  pass ;  that 
it  contained  too  much  new  and  radical  matter  to  be  adopted  all 
at  once,  if  at  all.  I  am  bound  to  admit,  moreover,  that  both  hu- 
man nature  and  the  official  experience  of  American  states  is 
against  the  full  collection  of  taxes  on  personal  property.  Human 
ingenuity  cannot  frame  tax  laws  that  will  force  people  to  pay 
taxes  on  personal  property  to  the  extent  required  by  the  letter 
of  the  present  law  and  of  the  state  constitution.  I  am  a  firm  be- 
liever in  an  income  tax. 

"The  Anderson  bill  [House  File  58]  will  be  a  great  thing  for 
this  state.  Few  persons  realize  the  extent  of  the  tax-dodging, 
real-estate  tax-dodging,  that  is  practiced  under  cover  of  law,  in 
the  northern  half  of  the  state.  One  thiid  of  these  taxes  are  never 
paid.  You  have  passed  five  'forfeited'  tax  bills  in  ten  years." 
[Meaning  clearance  sale  bills  of  lands  "forfeited  to  the  state,"  as 
described  above,  p.  247], 

Returning  to  the  tonnage  tax,  he  described  the  substantial 
progress  that  had  been  made  in  taxing  the  iron  mines  under  laws 
enacted  at  previous  sessions.  Chapter  134  of  the  laws  of  1897, 
empowering  the  state  board  of  equalization  to  increase  the  assess- 
ment of  corporations,  firms  or  individuals,  as  well  as  'Chapter 
235,  of  the  laws  of  1899  prohibiting  the  removal  of  ores  until 
after  payment  of  accrued  taxes — registered  a  big  advance  in  iron- 
mine  taxation.  The  state  board  had  already  got  the  assessed 
values  of  the  mines  up  to  $13,000,000.  This  year  there  would  be 
a  new  biennial  assessment,  and  he  was  confident  that  the  state 
board  would  bring  the  valuation  way  above  that  figure.  The 
state  auditor's  office  had  already  done  good  work  in  this  matter, 
because  he,  the  speaker,  had  used  horse  sense  and  a  part  of  the 
small  contingent  fund  allotted  to  his  office  to  send  a  special  ex- 
aminer into  the  iron  district  to  report  on  values.  If  the  legislature 
would  appropriate  v$2,ooo.oo  to  his  office  to  eniptov  the  right  ex- 
pert on  mining  values,  he  pledged  his  word  and  his  experience, 


HERTIG    ON    TAXATION.  265 

that  the  people  would  not  complain  henceforth  that  the  iron  mines 
did  not  pay  their  full  share  of  taxes ; — and  they  wouldn't  be  able 
to  hold  their  taxes  up  for  a  term  of  years  while  the  courts  were 
hammering  at  the  constitutionality  of  it !  Non-productive  mines, 
or  mines  held  for  speculation,  would  entirely  escape  taxation 
under  the  Jacobson  bill ;  and  in  years  when,  to  use  Carnegie's 
figure  that  "iron  is  either  prince  or  pauper,"  the  iron  and  steel 
trade  shall  seem  like  a  pauper  compared  to  its  present  princely 
business,  the  mining  of  ore  in  Minnesota  would  bo  so  curtailed  that 
local  revenues  in  the  iron  districts  would  fall  far  short  of  local 
needs.  [Well  said!  Iron  mine  assessments  now  $30,000,000.] 

Attorney  J.  L.  Washburn  of  Duluth,  who  was  the  next  speak- 
er, eloquently  attacked  the  tonnage  tax  at  all  points : 

Because  it  is  repugnant  to  the  constitution  as  it  was,  and  re- 
pugnant to  the  amendment  of  1895,  under  which  it  purports  to 
be  drawn ;  because  it  is  repugnant  to  the  principles,  and  lays  the 
ax  at  the  root  of  local  self-government ;  because,  aside  from  ques- 
tions of  constitutional  law,  the  taxation  it  proposes  is  upon  an  un- 
equal, unjust  and  unenduring  basis ;  because  the  people  of  Duluth 
fear  it  as  a  new  beginning  of  the  old  injustice,  whereby  the  state 
under  a  former  tonnage  tax  law,  held  unconstitutional,  had  sought 
to  turn  all  of  the  tonnage  revenue  into  the  state  treasury ;  because 
under  the  proposed  tax,  local  revenues  would  be  uncertain  and 
fluctuating ;  because  the  tonnage  method  of  taxing  mines  has  been 
tried  elsewhere,  proved  a  failure,  and  been  universally  abandoned  ; 
because  the  present  method  of  taxation  (assessment  of  mines  as 
other  real  estate  is  assessed)  is  efficient  and  capable  of  producing 
a  certain  and  sufficient  revenue  without  injustice  or  inequality; 
because  the  proposed  tax  militates  against  the  independent  miners 
of  low  grades  of  ore,  against  mining  on  state  lands,  and  against 
local  manufacture  of  iron  from  the  ores  of  the  state,  (and  this  for 
the  reason  that  a  tax  of  5  cents  per  ton  on  high  and  low  grade  ores 
alike,  would  exclude  our  low  grade  ores  from  use)  ;  because  it 
visits  with  injustice  the  taxpayers  of  the  most  profitable  subdi- 
vision of  the  state,  and  sets  the  hand  of  government  against  large 
and  important  interests  now  profitable  to  the  state  and  its  citizens ; 
because,  in  the  belief  that  the  proposed  legislation  is  void,  it  is 
certain  to  be  resisted  in  the  courts,  and  delay  for  a  long  time  the 
collection  of  needed  taxes  that  would  otherwise  be  collected  at  the 
usual  time. 

He  further  said  that  the  iron  ranges  run  about  125  miles,  east 
and  west,  and  include  five  little  cities  and  many  villages.  These 
were  a  unit  against  the  proposed  tax.  It  was  plain  to  all  the  peo- 
ple there  that  the  proposed  tonnage  tax,  should  it  go  into  effect, 
would  substitute  fear  and  depression  for  their  present  hope  and 


266  HERTIG    ON    TAXATION. 

confidence.  These  cities  and  villages  each  knew  that  their  reve- 
nues ,  nay  their  very  existence  would  be  subject  to  the  caprice  of 
the  mine  owners,  if  the  latter  could  at  any  time  choose  what  mines 
they  should  please  to  let  lie  idle  and  untaxed.  What  could  be 
more  subversive  to  local  self-government  than  a  combination  in 
the  legislature  which  should  successfully  fasten  upon  a  limited 
area  of  the  state  a  mode  of  taxation  which  the  citizens  of  that  area 
to  a  man  repudiated  ?  He  had  been  told  that  the  steel  trust, 
which  owned  most  of  the  mining  properties  and  has  ore  to  last  it 
for  100  years  to  come — was  doing  nothing  regarding  this  bill. 
He  could  well  believe  it ;  if  it  should  work  to  the  trust's  advantage, 
it  could  quietly  pay  the  ore  tax  and  keep  still ;  if  the  trust  people 
didn't  like  its  operation,  they  had  in  his  opinion  a  sure  thing  in 
seeking  to  have  the  courts  hold  it  unconstitutional.  Meanwhile 
the  people  would  be  the  real  sufferers  from  this  crude  and  un- 
called for  experiment  in  legislation.  He  believed  the  action  which 
this  Senate  would  take  would  prove  the  wisdom  of  having  two 
branches  of  the  legislature. 

His  apology  for  the  fear  expressed  that  there  was  danger  of 
an  attempt  to  enrich  the  state  treasury  by  robbing  Duluth  of  part 
of  what  should  be  justly  her  local  revenues — lay  in  the  fact  that 
he  was  a  frank,  plain-spoken  man  ;  that  the  fear  existed,  and  had 
its  ground  in  past  legislation  and  in  the  reckless  haste  with  which 
this  bill,  as  if  per  pneumatic  tube,  had  been  shot  through  the 
House  into  the  Senate ;  and,  he  might  have  added,  in  the  Sivright 
bill,  for  a  constitutional  amendment,  mentioned  more  fully  on  p. 
267,  below. 

I  feel  that  a  book  on  taxation  is  imperfect  if  it  fails  to  notice 
the  antagonisms  in  tax  matters,  between  the  different  parts  of  the 
same  state.  Though,  in  the  American  states,  that  part  of  the 
taxes  which  goes  into  the  state  treasury  is  small  as  compared  with 
the  parts  that  remain  for  local  use — in  Minnesota  about  one- 
eighth  of  the  taxes  levied  by  local  boards  is  for  the  state  treasurv 
— yet  this  small  part  is  amply  sufficient  to  inspire  zealous  effort  on 
the  part  of  the  different  counties  to  vie  with  each  other  before  the 
state  board  of  equalization  to  cut  down  their  aggregate  assessed 
values  and  thereby  whittle  a  thin  paring  off  their  state  tax.  Be- 
cause of  the  large  special  interests  of  Duluth,  perhaps  in  part  also 
by  survival  of  the  nagging  habit  inaugurated  long  years  ago  by 
J.  Proctor  Knott  in  his  burlesquing  panegyric  of  Duluth, — that 
city  and  her  county  of  St.  Louis  still  come  in  for  an  undue  share 
of  half-earnest  half-nagging  supervision  at  the  hands  of  the  legis- 
lature— I  should  say  attempts  at  such  supervision  by  some  part  of 
the  legislature,  as  lately  at  least,  no  successful  attempts  of  this 
kind  have  been  launched  ;  and  we  have  alreadv  seen  that  <:he  same 


HERTIG    ON     TAXATION.  267 

House  which  was  stampeded  on  the  tonnage  tax,  showed  its  good 
will  to  Duluth  in  its  entire  willingness  to  continue  in  her  favor 
the  unconstitutional  vessel  tax,  though,  as  the  state  treasury  gets 
half  of  the  same,  the  half  now  amounting  to  about  $5,000.00  per 
annum,  while  in  1894,  the  last  year  of  the  ad  valorem  tax  on  ves- 
sels, the  total  tax  collected  on  Duluth  shipping  was  $3,038,  of 
which  the  state  only  got  an  eighth  or  thereabouts, — it  is  plain  that 
it  would  not  be  in  the  best  of  taste  for  the  rest  of  the  state  to 
twit  Duluth  as  to  the  enjoyment  of  unconstitutional  favors.  The 
spirit  of  fair  play,  as  well  as  of  reform  taxation,  is  now  abroad, 
and  I  think  may  be  counted  upon  to  ward  off  serious  injustice 
from  particular  localities.  The  spirit  of  fair  play  was  amply  suf- 
ficient at  the  special  session,  to  kill  the  unjust  bill  for  a  constitu- 
tional amendment  offered  in  the  Senate  by  Sivright  (Rep.),  of 
McLeod,  authorizing  the  legislature,  among  other  grants  of  pow- 
er, to  make  such  disposition  as  it  should  see  fit  of  the  taxes  col- 
lected from  iron  mines.  This  bill  was  promptly  killed  by  the 
judiciary  committee  of  the  Senate.  The  right  of  the  state  at  large 
to  control  any  particular  city  or  locality  is,  of  course,  as  full  and 
flexible  as  the  people  in  declaring  their  organic  law,  or  constitu- 
tions, choose  to  make  it ;  the  discreet  exercise  of  this  right  is  quite 
another  matter,  and  involves  the  nicest  and  most  delicate  functions 
of  statesmanship. 

When  Washburn  had  finished  his  very  effective  speech,  Alfred 
Merritt,  also  of  Duluth,  and  known  as  having  had  very  large,  and 
as  having  yet  some  mining  interests  not  in  the  steel  trust,  was 
called  before  the  committee  and  made  a  frank,  almost  cynically 
frank,  statement 'of  the  helpless  position  of  the  independent  mine 
owner ;  he  can  mine  ore  as  cheaply  as  any  one,  but  to  get  it  from 
mine  to  market — there's  the  rub.  "The  independent  mine  owner 
has  ceased  to  exist,"  said  Merritt ;  "he  may  claim  to  exist,  but  the 
existence  and  the  name  of  'independent'  are  idle  mockeries.  The. 
people  who  are  making  a  profit  out  of  iron  mines  own,  or  can 
'pull'  the  ore  railways,  the  lines  which  carry  iron  ore  from  the 
mines  to  the  clocks.  Unless  an  owner  is  connected  with  or  inter- 
ested in  one  of  these  railways,  he  cannot  ship  a  single  pound  of 
ore  to  Cleveland  at  a  profit.  Take  a  case  in  point.  A  million 
tons  of  ore  from  one  mine  was  sold  in  Cleveland  last  season  at 
$2.26  per  ton.  Thirty-five  cents  per  ton  was  paid  as  royalty, 
eighty  cents  for  railway  freights  from  mine  to  dock,  seventy  cents 
for  lake  freights,  55  cents  for  mining  expense,  and  from  10  to  15 
cents  for  insurance.  Total  $2.50  to  $2.55  per  ton.  If  these  had 
been  honest  charges,  the  loss  on  that  shipment  alone  would  have 
been  $250,000.  But  instead,  a  heavy  profit  was  made  because  of 
rebates  paid  by  the  carriers.  Titles  in  fee  to  independent  mine 


'268  HERTIG    ON     TAXATION. 

property  are  now  not  worth  a  dollar  because  of  the  discrimina- 
tion in  ore  rates.  I  have  disposed  of  nearly  all  I  owned,  an-d  am 
trying  to  get  rid  of  the  rest  before  the  situation  is  generally 
known.  Some  of  .the  owners  used  to  think  they  were  independ- 
ent, but  they  were  compelled  to  quit.  There  are  none  now  for  this 
bill  to  injure." 

The  smaller  public  service  companies  of  the  state  now  found 
a  voice  to  protest  in  their  interest  against  the  proposed  franchise 
tax.  To  hit  them  with  an  assessment  of  all  their  tangible  personal 
property,  all  of  their  real  estate,  then  add  up  the  value  of  their 
outstanding  bonds  and  stocks,  and  deducting  therefrom  the  as- 
sessed value  of  their  personal  property  and  real  estate,  assess  the 
difference  as  the  value  of  their  franchises,  would,  argued  S.  Liver- 
more,  of  Winona,  and  manager  of  a  company  there,  take  in  total 
annual  taxes  21  per  cent  of  the  gross  earnings  of  his  own  com- 
pany. He  had  figures  from  a  number  of  other  public  service 
companies  in  the  smaller  cities  of  the  state  showing  that,  as  ap- 
plied to  them,  the  like  taxation  would  take  from  8  to  38  per  cent, 
of  their  gross  earnings. 

At  this  point  I  took  the  floor  for  five  minutes,  and  proclaiming 
robust  skepticism  as  to  the  bill  ever  being  enforced  to  the  extent 
or  in  the  spirit  contemplated  by  its  supporters,  predicted  that  its 
immediate  effect,  if  enacted  would  be  a  scare  effect  which  would 
check  for  awhile  the  carrying  out  of  contemplated  public  service 
enterprises  in  various  portions  of  the  state,  particularly  the  build- 
ing of  electric  roads,  one  of  which  I  mentioned  as  likely  to  be 
built  in  Senator  Buckman's  district,  and  on  which  a  halt  had  been 
called  on  account  of  this  very  bill ;  that  after'  a  time  the  wind 
would  be  tempered  to  the  attempted  to  be  shorn  lambs,  or,  if  gen- 
tlemen preferred,  the  assessor's  ax  would  be  found  very  dull 
against  the  attempted  to  be  mangled  wolves,  who  would  find  a 
way  to  get  their  full  measure,  or  more,  of  protection  and  shelter, 
—whereupon  things  would  go  on  much  as  they  do  now  ;  that  if  any 
dazzling  profits  had  been  made  in  the  operation  of  public  service 
companies  in  the  smaller  cities  of  Minnesota,  I  was  not  aware  of 
them,  though  I  spoke  from  some  personal  experience  and  consider- 
able further  knowledge  in  that  line,  but  without  any  personal 
pecuniary  interests  to  be  in  any  wise  affected  by  this  bill ;  that 
one  gentleman  whom  I  knew  had  some  years  ago  installed  in  one 
of  the  smaller  cities  an  electric  street  car  line,  comprising  a  little 
more  than  three  miles  of  track  laid  with  30  Ib.  steel  rails,  power- 
house, engine,  dynamo,  cars,  etc. — at  a  total  expense  of  $53,- 
ooo.oo ;  that  he  operated  the  same  for  two  or  three  years  at  an 
average  loss  of  about  $10.00  per  day,  and  then  scrapped  the  plant, 
— offering  the  material  and  machinery  thereof  at  $10,000  to  who- 


HERTIG    ON    TAXATION.  269 

ever  would  buy ;  that,  while  I  did  not  hold  this  case  forth  as 
typical,  it  was  undoubtedly  true  that  more  money  in  the  aggregate 
had  been  lost  than  had  been  gained  by  public  service  companies 
in  the  smaller  cities ;  that  the  practice  in  this  state  with  regard 
to  the  taxation  of  such  companies  in  such  cities  had  been  to  ob- 
serve the  law  in  form,  and  completely  violate  it  in  substance,,  by 
approving  a  valuation  which  would  yield  a  tax  that  might  be 
compared  to  a  not  unreasonable  annual  license  fee ;  that  all  statu- 
tory, or  written,  law  is  no  more  than  its  letter  modified  by  custom  ; 
that  a  gross  earnings  tax,  discreetly  and  expertly  graded,  is  the 
only  good  way  to  tax  public  service  companies ;  that  the  Jacob- 
son  bill,  if  construed  to  half  the  extent  of  its  letter,  would  certainly 
confiscate  the  smaller  public  service  companies ;  that  any  tax,  in 
so  far  as  it  is  not  a  just  income  tax  in  effect,  if  not  in  letter,  is 
a  confiscatory  tax ;  that,  with  the  present  temper  of  the  people 
and  of  their  tax  officials,  any  tax  code  let  alone  long  enough  to 
have  custom  give  it  a  settled  construction  becomes  merely  a  ma- 
chine to  levy  and  collect  income  taxes  ;  that  a  shining  illustration 
of  this  is  the  tax  on  incorporated  banks, — seemingly  and  con- 
fessedly a  high  tax,  and  in  fact  partially  confiscatory  on'  a  new 
bank,  though  the  rule  in  this  state  is  to  assess  shares  at  only  50 
per  cent,  of  their  book  value ;  that  the  bank  tax  would  in  fact 
drive  all  incorporated  banks  out  of  business,  if  it  were  an  ad 
valorem  tax  at  current  rates  on  fifty  per  cent,  of  the  bank's  entire 
assets,  instead  ,of  being  as  it  is  only  50  per  cent,  of  the  bank's 
technical,  which  is  in  fact  only  its  nominal,  capital;  that,  for 
further  illustration,  a  bank  having  $1,000,000  of  share  capital, 
cannot  be  considered  as  firmly  established  and  successful  until  it 
has  from  three  to  five  times  that  amount  of  deposits ;  that  by  the 
custom  which  makes  law  these  deposits  as  such  are  unta.red;  that 
thus  a  well  established  bank  having  $1,000,000  of  share  capital 
and  $4,000,000  more  of  deposits  pays  annually,  let  us  suppose, 
a  tax  01  $20,000,  or  $4,000  for  each  $1,000,000  of  resources,  or 
4-10  of  one  per  cent,  on  its  aggregate  actual  capital,  and  equiva- 
lent to  a  moderate  income  tax ;  that  the  same  $20,000  paid  by  the 
bank,  while  it  is  yet  new  and  has  only  a  small  line  of  deposits  is  a 
very  burdensome  tax  and  partially  confiscates ;  that,  for  the  rest, 
the  right  of  confiscation,  like  the  right  of  revolution,  remains  one 
of  the  reserved  and  inalienable  rights  of  the  people,  but  that  for 
the  present  day  and  date  we  have  no  statesmen  in  place  who  con- 
fess the  will,  or  profess  the  skill,  to  use  these  tremendous  rights 
to  the  people's  advantage ;  that,  as  for  me,  I  could  always  be 
counted  in  the  opposition  when  it  came  to  corporation  "tail- 
twisting" — when  it  should  come  to  corporation  head-twisting, 
there  would  be  something  different  to  say. 


270  HERTIG    ON    TAXATION. 

The  next  day,  March  4th,  there  was  a  protest  before  the  Senate 
tax  committee  against  creating  a  permanent  tax  commission-  R. 
A.  Kirk,  of  St.  Paul,  and  speaking  for  the  wholesale  traders  of  the 
Twin  Cities  and  Duluth,  argued  that  such  commission  is  unneces- 
sary, expensive,  non-representative,  and  against  the  spirit  of  home 
rule..  The  board  of  equalization,  as  at  present  constituted,  repre- 
sented all  portions  of  the  state,  had  given  satistaction,  and  should 
be  continued. 

On  this  day,  too,  the  larger  public  service  corporations  ap- 
peared, and  for  the  first  time,  during  the  special  session,  made 
public  and  official  protest  against  the  proposed  legislation.  J.  F. 
Calderwood,  comptroller  of  the  Twin  City  Rapid  Transit  Com- 
pany, which  owns  and  controls  the  street  car  systems  of  St.  Paul 
and  Minneapolis — opposed  the  Jacobson  bill  on  two  grounds  : 

First :  That  it  would,  if  enacted,  confiscate  the  property  of 
his  company. 

Second :  That  "it  is  in  direct  violation  of  sec.  I  of  article  IX. 
of  the  constitution,  beginning  thus:  'All  taxes  to  be  raised  in 
this  state  shall  be  as  nearly  equal  as  may  be,  and  all  property  on 
which  taxes  are  to  be  levied  shall  have  a  cash  valuation  and  be 
equalized  and  uniform  throughout  the  state.'  ' 

Calderwood  argued  his  second  proposition  more  as  a  layman 
than  as  one  learned  in  the  law ;  and  showed  rather  that  the  steam 
railroads  under  their  alleged  inviolable  contract  with  the  state 
whereby  they  pay  into  the  state  treasury  three  per  cent,  of  their 
gross  earnings  in  lieu  of  all  other  taxes,  have  the  better  end  of 
the  bargain,  than  that  other  concerns,  not  enjoying  the  like  con- 
tract privilege,  have  any  special  claim  to  constitutional  considera- 
tion, or  ground  to  fear  technical  infringement  of  their  constitu- 
tional rights.  It  was,  however,  easy  for  him  to  support  with 
facts  the  plain  statement  that  taxes  are  not  really  uniform  in  Min- 
nesota. Thus,  as  he  said,  "the  1901  taxes  of  the  Twin  City  Rapid 
Transit  Company,  payable  in  1902,  are  $149,728.28.  The  gross 
earnings  of  the  company  for  the  fiscal  year  ending  Dec.  31,  1901. 
were  $3,173,975.85.  The  tax  amounts  to  4.7  per  cent,  of  the  gross 
earnings.  This  is  54  per  cent,  greater  than  the  3  per 
cent,  gross  earnings  tax"  on  steam  railroads,  "and  17^  per  cent, 
greater  than  the  proposed  4  per  cent,  gross  earnings  tax  which  is 
to  be  submitted  to  the  people  by  constitutional  amendment  next 
November." 

Calderwood's  comparison  of  the  taxes  paid  by  his  company 
with  those  paid  by  steam  railroads  in  Minnesota  of  nearly  equal 
and  somewhat  greater  earnino-  capacity  is  interesting  to  the  tax 
student:  "Twin  City  Rapid  Transit  'Company  taxes  for  1901  are 
nearly  $20,000  larger  than  the  Minnesota  taxes  of  either  the  Du- 


HERTIG    ON    TAXATION.  271 

luth  &  Iron  Range  or  the  'Omaha,'  although  the  Minnesota  gross 
earnings  of  these  roads  are  over  $1,000,000  greater  than  those  of 
the  Twin  City  Rapid  Transit  Company.  Twin  City  Rapid  Tran- 
sit taxes,  again  are  over  100  per  cent,  larger,  both  in  rate  and 
volume,  than  the  taxes  of  the  Duluth,  Missabe  &  Northern,  whose 
earnings  are  several  hundred  thousand  dollars  greater,  [but  which 
on  account  of  its  newness  pays  a  gross  earnings  tax  of  only  2. 
per  cent.,  p.  109,  supra  ;  and  likewise  are  more  than  double  in 
volume  the  Minnesota  taxes  of  either  the  Minneapolis  &  St.  Louis 
or  the  Chicago  &  Northwestern,  on  the  basis  of  the  earnings  of 
these  two  roads  for  the  year  1900,  $2,389,939,  and  $2,435,110  re- 
spectively." 

Calderwood  made  a  very  interesting  showing  in  comparing 
the  dividends  and  taxes  of  his  company  with  those  items  of  the 
Eastern  Railway  of  Minnesota,  which  is  a  part  of  the  Great 
Northern  railway  system,  substantially  its  line  between  the  Twin 
City  and  Duluth.  "In  Minnesota  mileage,"  he  said,  "Minnesota 
earnings,  and  amount  of  common  stock  outstanding  the  two  roads 
are  approximately  alike.  In  volume  of  dividends  and  taxes,  they 
are  quite  different.  Minnesota  gross  earnings  are  $3,207,142  for 
the  Eastern  railway  and  $3,173,975  for  the  Twin  City  Rapid  Tran- 
sit Company.  Minnesota  taxes  were  $96,214  for  the  Eastern 
railway  and  $149,728  for  the  Twin  City  Company,  or  50  per  cent, 
larger  for  the  latter. 

"The  Dividends  paid  by  the  Eastern  railway  (see  pages  333-5 
of  the  1901  report  of  the  state  railroad  and  warehouse  commis- 
sion) were  12  per  cent,  on  $16,000,000  of  common  stock,  amount- 
ing to  $1,920,000.  The  dividends  paid  by  the  Twin  City  Com- 
pany on  $15,010,000  of  common  stock  outstanding  were  4  per 
cent,  and  amounted  to  $600,400,  being  less  than  one-third  those 
of  the  Eastern  railway.  For  the  year  1900  Eastern  railway  divi- 
dends were  10  per  cent,  on  $16,000,000  of  common,  and  Twin 
City  dividends  were  3  per  cent,  on  $15,010,000  of  common.  For 
1899,  which  was  the  first  year  holders  of  Twin  City  common  en- 
joyed a  dividend,  Eastern  railwav  dividends  were  10  per  cent,  on 
$12,500,000  or  $1,250,000,  and  Twin  City  dividends  were  2^2  per 
cent,  amounting  to  $375,250. 

Taxes  on  Minnesota  gross  earnings  of  the  Eastern  railway 
for  the  last  three  years  reported  were,  respectively,  $96,214, 
$81,500,  and  $56,289,  a  total  of  $234,003  for  the  three  years, 
amounting  to  somewhat  less  than  6  per  cent,  of  the  dividends  paid 
on  the  common  stock.  Taxes  of  the  Twin  City  Rapid  Transit  for 
the  past  three  years  are,  respectively,  $149,728,  $119, 761 -and  $91,- 
201,  the  three  year  total  being  $360,690,  or  25  per  cent,  of  the 
common  stock  dividends  for  the  only  three  years  in  which  that 


272  HERTIG     ON     TAXATION. 

stock  has  had  dividends  at  all.  fit  is  but  fair  to  remind  the 
reader  here  that  the  stock  of  the  Eastern  railway  of  Minnesota  is 
all  common  stock  and  is  in  the  treasury  of  the  ureat  NortHern 
railway  company,  which  of  course  receives  the  dividends,  and 
that  the  Twin  City  Rapid  Transit  Company  has,  besides  the  com- 
mon stock  mentioned,  $3,000,000  of  preferred  stock  on  which 
dividends  of  7  per  cent,  have  ben  regularly  paid  for  some  years.] 

*       *       * 

"But  in  addition  to  paying  a  50  per  cent,  larger  proportion  of 
its  earnings  in  taxes,  than  the  average  Minnesota  steam  road,  the 
Twin  City  Rapid  Transit  Company  bears  other  public  charges 
not  expected  of  steam  roads.  For  example,  it  pays  out  about 
$100,000  per  annum  in  street  paving  and  on  the  average  about 
$10,000  a  year  in  snow  removed  from  the  public  streets.  These 
charges  in  many  cities  are  included  in  the  taxes ;  [and  hence  in 
such  cases  enter  into  the  statistics  of  taxes  paid  by  the  street  rail- 
way companies,  and  to  that  extent  swell  those  figures  unduly,  if 
compared  without  discrimination  with  the  taxes  paid  by  street 
railways  in  Minnesota,  where  the  paving  charges  are  not  so  in- 
cluded. Calderwood  reckons  the  average  of  taxes  paid  by  the 
street  railways  of  the  United  States,  apparently  using  these  taxes 
as  paid  in  the  more  important  cities  for  his  basis — at  'perhaps 
about  4  per  cent,  of  the  gross  earnings.'] 

*     *     * 

"In  Milwaukee,  *  *  *  the  city  bears-  the  first  cost  of  the 
paving  between  and  for  a  foot  outside  of  the  tracks  and  rails,  and 
the  company  is  required  to  keep  up  the  repairs  afterwards  only. 
In  the  Twin  Cities  the  street  railway  bears  the  first  cost.  Last 
year  it  was  $185,000;  in  1900,  $90,000;  in  1899,  $87,000;  in  1898, 
$75,000;  in  1897,  $100,000;  in  1896,  $150,000.  This  covers  sim- 
ply the  cost  of  paving  and  does  not  cover  the  cost  to  the  com- 
pany by  reason  of  the  reconstruction  of  its  tracks.  These  addi- 
tional public  charges  not  borne  by  the  steam  roads  amount  on  the 
average  to  very  nearly  the  ordinary  direct  taxes.  [Moreover] 
our  company  will  expend  this  year  [1902]  on  account  of  street 
paving  in  the  two  cities  $300,000;  [and  we  have]  in  hand  and 
are  letting  contracts  for  $170,000  of  improvements,  but — today, 
|  March  4th],  I  am  in  receipt  of  telegrams  stating  that  if  the  bill 
passes  as  proposed  we  cannot  negotiate  the  securities  to  meet  this 
expenditure.  *  *  * 

"Let  us  now  see  what  the  taxes  would  be  under  the  proposed 
bill  that  is  before  this  House.  [Calderwood  here  quoted  the  de- 
tails of  the  bill's  assessment  provisions.] 

"Let  us  apply  this  method  to  Twin  City  Rapid  finance  for 


HERTIG    ON     TAXATION.  273 

1901.     Taking  the  market  quotations  of  capital  stock  and  funded 
debt,  we  get  the  following  result : 

$i5,ooo;ooo  of  common  stock  at  $1.10 $16,500,000 

$3,000,000  of  preferred  stock  at  $1.50 4,500,000 

$10,888,000  of  mortgage  bonds  at  $1.10 11,976,800 

Total  market  value  of  securities $32,976,800 

"As  the  company  is  [to  be]  first  assessed  on  the  value  of  its 
tangible  real  estate  and  personal  property,  and  as  the  value  of 
the  franchise  is  deemed  to  be  the  total  amount  [or  rather  value] 
of  the  capital  stock  and  bonded  debt,  less  the  value  of  the  real 
estate  and  personal  property  thus  assessed,  it  is  apparent  that  the 
aggregate  assessed  valuation  in  any  case  amounts  to  the  total 
value  of  the  capital  stock  and  bonded  debt,  and  that  the  deductions 
for  tangible  real  and  personal  property  are  wholly  immaterial. 
The  real  and  personal  property  of  the  company  may  be  assessed 
at  $1,000  or  at  $10,000,000,  the  total  assessment  for,  taxation  will 
be  just  the  same,  and  in  this  case,  if  the  letter  of  the  [proposed] 
law  is  enforced,  will  be  $32,976,800. 

''How  large  a  tax  would  this  produce? 

"The  tax  levy  in  the  Twin  Cities  is  approximately  30  mills 
on  the  dollar ;  the  actual  average  on  the  company's  valuation  in 
Hennepin,  Ramsey  and  Washington  counties  for  1901  being  29.2 
mills.  A  rate  of  29.2  mills  on  a  valuation  of  $32,976,800  produces 
a  tax  of  $962,922.56.  This  is  over  30  per  cent,  of  the  total  gross 
earnings  of  the  company  for  the  calendar  year  just  closed.  It  is 
50  per  cent,  greater  than  the  dividends  paid  to  the  holders  of  the 
$15,000,000  of  common  stock.  It  is  70  per  cent,  greater  than  the 
annual  interest  charges  on  the  $10,833,000  of  bonded  debt.  It 
is  over  three  times  the  amount  paid  into  the  treasury  of  Minne- 
sota by  any  Minnesota  railroad..  It  is  two-thirds  of  the  total 
taxes  paid  last  year  by  all  Minnesota  railroads.  *  *  *  The 
avgregate  gross  earnings  railway  tax  of  the  39  railway  com- 
panies doing  business  in  Minnesota  and  reporting  thereon  to  the 
state  commission  is  $1,441,548,  which  is  only  about  one-half  more 
than  the  bill  would  levy  upon  a  single  street  railway. —  [Report  of 
Railroad  and  Warehouse  Commissioners,  p.  76.]  The  Minne- 
sota gross  earnings  of  these  39  railroads  is  $49,767,322,  or  about 
15  times  that  of  the  single  street  railway.  [Calderwood  here 
asked,  in  substance,  'Is  this  the  equality  of  taxation  and  uni- 
formity of  valuation  that  the  framers  of  section  i  of  article  IX. 
of  the  state  constitution,  had  in  mind?']  *  *  * 

"For  1901,  the  balance  [or  net  earnings],  after  deducting  the 
cost  of  operation  [from  the  gross],  is  $1,758,524  ;  from  this  deduct 
the  interest  charges  of  $772,000,  and  the  tax  $962,000,  as  proposed 


274  HERTIG    ON     TAXATION. 

under  this  bill,  and  you  have  a  balance  of  $24,524.  Deduct  this 
from  the  $281,000  we  expended  in  betterments,  from  our  profit 
of  1901,  and  the  stockholders  would  be  obliged  to  go  down  into 
their  pockets  for  $256,000  to  meet  the  expenses  for  1901.  This 
would  effectually  wipe  out  the  common  stock. 

''There  is  always  a  consolation,  it  is  said,  in  every  calamity. 
The  consolation  in  this  case  would  be  this :  The  $900,000  tax  of 
the  first  year  would  be  reduced  50  to  75  per  cent  for  the  second 
year  by  reason  of  the  fact  that  the  stock  would  have  no  value. 
Only  so  long  ago  as  1898,  Twin  City  Rapid  Transit  common  stock 
was  worth  only  15  cents  on  the  dollar,  because  it  earned  no  divi- 
dends. But  a  tax  proposition  which  produced  assessments  in 
place  of  dividends  would  wipe  out  the  15  cents  on  a  dollar,  and 
the  holders  would  be  paying  bonuses  to  get  somebody  to  take  the 
stock  as  a  gift.  Meanwhile,  the  market  value  of  the  securities 
would  drop  to  a  figure  which  would  yield  the  state  less  revenue 
than  the  taxes  now  secured. 

"We  are  interested  in  the  Duluth  street  railway  company ;  we 
have  never  paid  any  dividends  [there],  but  if  this  law  [bill] 
passes  as  proposed,  we  will  not  be  able  to  meet  our  interest 
charges  within  $160,000." 

Rome  G.  Brown,  a  Minneapolis  lawyer,  pointed  out,  in  behalf 
of  water  power  companies,  that  the  endeavor  of  the  bill  to  in- 
clude them  among  the  companies  that  could  operate  only  by  virtue 
of  special  franchises — was  merely  an  attempt  at  fiat  transforma- 
tion; that  the  law  of  this  state,  as  settled  by  a  line  of  supreme 
court  decisions,  declares  the  right  to  develop  and  use  or  lease  wa- 
ter power  to  be"  a  riparian  right  attaching  to  lands  adjacent  to  the 
place  of  development ;  that  therefore  the  right  to  so  develop,  use, 
or  lease  could  not  be  transformed  into  a  franchise  right  by  legis- 
lation. 

E.  E.  Webster,  of  Minneapolis,  general  manager  of  the  Twin 
City  Telephone  Company,  showed  that  his  company  was  not  oper- 
ating under  an  exclusive  franchise,  but  under  city  ordinances  fix- 
ing its  rates  and  regulating  the  quality  of  its  service  and  equip-" 
ment.  In  the  Minneapolis  ordinance,  a  special  earnings  tax  in 
addition  to  general  taxes  had  been  reserved, — 5  per  cent,  of  earn- 
ings of  all  telephones  that  the  company  should  install  in  excess  of 
the  number  installed  by  its  competitor.  The  proposed  law  would 
make  its  taxes  amount  to  45  per  cent,  of  its  gross  earnings,  for 
the  current  year,  computed  on  the  showing  for  February. 

D.  F.  Morgan,  attorney  for  the  Northwestern  Telephone  Com- 
pnay,  said  that  if  his  company  were  taxed  under  the  proposed 
law,  such  tax  would  take  10  per  cent  of  its  gross  earnings,  which 
be  equivalent  to  43.6  per  cent  of  its  net  earnings.  [On 


HERTIG    ON     TAXATION.  275 

this  statement,  then,  it  takes  to  operate  Morgan's  company  and 
maintain  its  equipment  in  condition  for  service  77  per  cent,  of  the 
<2TOss  earnings,  leaving  23  per  cent,  out  of  which  to  pay  interest 
on  bonded  debt,  if  any,  and  dividends  to  stockholders.]  All  he 
asked  was  equal  taxation  with  other  classes  of  property.  He  did 
not  like  the  inquisitorial  features  attached  ^o  the  tax  commission 
sections  of  the  bill. 

A.  B.  Jackson,  of  Minneapolis,  attorney  for  the  Minneapolis 
Gas  Light  Company,  made  the  point  that  increased  taxation  of 
public  service  companies  would  result  in  one  of  two  things : 
Either  the  character  of  the  service  would  be  impaired  or  its  cost 
would  be  increased,  and  in  that  event  the  consumer  would  pay 
the  tax.  The  taxation  contemplated  in  the  Jacobson  bill  would 
bring  the  Gas  Light  Company's  tax  up  to  21  per  cent,  of  their 
gross  earnings. 

Robinson,  general  manager  of  the  Minneapolis  General  Elec- 
tric Company  said  they  operated  under  an  ordinance  prescrib- 
ing a  very  expensive  installation  of  their  plant  as  a  condition  for 
operating  at  all  and  requiring  them  further  to  furnish  the  city 
with  service  worth  $6,000.00  per  annum  in  addition  to  their  reg- 
ular taxation.  The  tax  under  the  proposed  law  would  amount  to 
2il/4  per  cent  of  their  gross  earnings,  and  they  could  probably  pay 
it  the  first  year,  but  after  that  they  would  be  relieved,  as  their 
property  then  would  have  practically  no  taxable  value. 

And  now  on  March  5,  the  senate  committee  on  taxes  made  its 
report  on  the  bill,  recommending  indefinite  postponement.  While, 
of  the  committee  members,  none  seemed  to  favor  the  bill  as  it 
stood,  four  of  the  thirteen  favored  reporting  it  back  to  be  placed 
on  general  orders  without  recommendation.  The  committee's  vote 
on  indefinite  postponement  was  as  follows : 

Yeas:  Caller  (Dem.),  Greer  (Rep.),  E.  E.  Smith  (Rep.), 
Daugherty  (Rep.),  E.  J.  Jones  (Rep.),  Roverud  (Rep.),  Somer- 
ville  (Rep.),  Stockwell  (Demo-Pop.),  Underleak  (Rep.). 

Nays:  Grindeland  (Rep.),  McGill  (Rep.),  Miller  (Rep.), 
Snyder  (Rep.). 

Snyder  presented  a  minority  report  on  behalf  of  himself  and 
his  three  colleagues,  as  follows:  [We]  "are  of  the  opinion  that 
the  bill,  as  it  reads,  does  not  provide  a  fair  and  equitable  method 
for  the  taxation  of  mines  and  public  service  corporations,  as  com- 
pared with  the  method  of  taxing  all  other  property  in  this  state ; 
but  are  of  the  opinion  that  the  bill  can  be  amended  so  that 
it  will  be  a  desirable  bill  to  pass,  and  respectfully  recommend 
that  'House  File  56'  be  placed  on  General  Orders  without  recom- 
mendation." The  adoption  of  the  minority  report  would  doubt- 
less have  resulted  in  discussion  of  its  features  section  by  section, 


276  HERTIG     ON     TAXATION. 

as  soon  as  it  should  have  been  reached  "on  General  Orders,"  the 
offering  and  adoption  of  numerous  amendments,  and  probably  the 
passage  by  the  senate  of  the  bill  as  so  amended,  with  somewhat 
diminished  probability  that  the  House  \  ould  have  concurred  in 
such  amended  bill.  As  it  was,  however,  the  majority  report  rec- 
ommending indefinite  postponement  was  adopted,  after  an  in- 
teresting debate,  and  the  bill  killed. 

Snyder  in  support  of  his  motion  to  substitute  the  minority  for 
the  majority  report,  said  that  the  committee  v/as  a  unit  against  the 
tonnage  tax  provision,  but  differed  on  some  of  the  other  pro- 
visions. For  himself  he  wanted  the  tax  commission  feature  pre- 
served if  everything  else  was  eliminated. 

Young  (Rep.)  supported  Snyder s  motion  in  a  very  earnest 
speech.  All  the  conditions  were  favorable  to  making  an  effective 
piece  of  legislation  of  the  bill,  and  it  would  be  the  height  of  folly 
or  worse  to  discard  all  that  has  been  done,  and  confess  impotence 
to  avail  themselves  thereof.  Enemies  and  friends  of  the  bill  were 
now  practically  a  unit  in  agreeing  that  its  tonnage  tax  provisions 
should  be  stricken  out.  The  way  so  far  was  clear :  strike  them 
out  and  go  ahead.  Moreover,  nobody  wanted  to  assess  franchises 
on  a  basis  that  would  confiscate,  and  the  bill  would  not  have  that 
result.  Indeed  a  provision  could  be  added  to  the  bill  in  set  terms 
for  the  valuation  of  franchises  in  the  same  proportion  as  other 
property.  The  extra  session  had  been 'called  to  enact  tax  legis- 
lation ;  there  was  a  demand  for  legislation  to  properly  tax  corpo- 
rations ;  the  people  would  demand  an  explanation  if  such  legis- 
lation were  not  forthcoming ;  and  the  Republican  party  in  this 
state  would  suffer  if  nothing  should  be  done.  He  appealed  to  the 
Republicans  of  the  senate  to  save  the  bill;  all  objections  could 
be  obviated  by  amendment. 

In  speaking  a  second  time  on  the  motion,  Senator  Young  criti- 
cised the  address  ot  Comptroller  Calderwood,  of  the  Twin  City 
Rapid  Transit  Company,  made  before  the  tax  committee,  and  said 
that  Calderwood's  figures  showed  that  that  corporation  was  pay- 
ing in  taxes  only  4  mills  on  the  dollar  of  actual  valuation,  while 
all  other  property  paid  30  mills.  [But  this  is  comparing  the  per- 
centage of  tax  paid  on  market  value  with  the  percentage  paid  on 
assessed  values — without  reducing  to  a  common  denominator.] 
A  dividend  of  7  per  cent.,  he  said,  coming  nearer  to  just  criti- 
cism, had  been  paid  on  Twin  City  preferred  stock,  representing 
actual  investment,  and  4  per  cent  on  the  common  stock,  represent- 
ing water. 

McCarthy  (Rep.),  of  Itasca,  made  an  eloquent  and  elaborate 
argument  in  support  of  Snyder's  motion,  and  urged  the  passage 
of  some  tax  reform  law.  Tax  reform  had  been  an  issue  in  this 


HERTIG    ON     TAXATION.  277 

state  for  some  years ;  up  to  January  loth  everybody  wanted  tax  re- 
form, and  understood  what  was  to  .be  accomplished  by  an  extra 
session  in  carrying  out  the  program  begun  by  the  legislature  1'n 
1901.  Suddenly  came  a  change;  soon  after  the  tax  commis- 
sion's report  appeared,  nearly  every  newspaper  in  the  state  re- 
versed itself,  and  began  to  argue  that  nothing  should  be  done. 
The  big  corporate  interests  had  hurled  the  whole  state  against  the 
legislature,  and  had  defeated  the  tax  code.  When  the  Wallace 
amendments  were  adopted  in  the  House,  the  seeds  of  death  were 
sown  in  the  bill.  The  senate  had  now  the  one  remaining  chance 
to  save  some  very  important  raid  vital  features  of  the  code  prepared 
by  the  tax  commission.  .  Would  his  fellow  members  be  equal  to  the 
occasion?  If  they  were  not,  the  legislature  and  the  Republican 
party  would  be  held  responsible,  and  the  party  would  suffer  the 
consequences. 

Johnson  (Dem.),  of  Nicollet,  said  he  fully  agreed  with  the 
doleful  forebodings  for  the  Republican  party  held  by  two  of  its 
most  able  members  (Senators  Young  and  McCarthy),  but  he, 
as  a  Democrat  could  not  help  them  out.  He  would  not  have  voted 
for  the  tax  code  of  the  commission  in  its  original  form  and  he 
certainly  would  not  vote  now  for  this  choice  bouquet  culled  out  of 
its  worst  features,  to  encourap-e  political  buncombe,  and  t-ike  a  fall 
out  of  the  Twin  City  Rapid  Transit  Company,  towards  which 
most  of  the  arguments  of  the  friends  of  the  bill  had  been  ad- 
dressed. He  was  opposed  to  the  franchise  tax  proposition,  be- 
cause it  would  cripple  the  independent  telephone  lines  and  like 
enterprises  throughout  the  state. 

Jones  (Rep.),  of  Todd,  said  he  was  not  afraid  to  meet  the  is- 
sue. This  was  not  a  Republican  measure,  nor  would  a  vote  on  it 
afford  any  test  of  party  fealty.  Its  friends  could  not  cram  the  bill 
down  his  throat,  merit  or  no  merit,  by  labeling  it  a  Republican 
measure.  A  special  session  with  negative  results  was  immeasur- 
ably better  than  a  special  session  with  indefensibly  bad  results. 
He  would  admit  that  the  special  session  would  not  shine  as  a 
bright  particular  star  in  the  Republican  galaxy ;  but  he  could  not 
for  the  life  of  him  see  that  it  had  or  would  spread  a  coat  of  tar- 
nish over  its  other  stars,  unless  by  a  miracle  some  such  bill  as 
this,  should  be  yet  passed.  Anyway  if  there  should  be  any  tar- 
nish on  the  party,  he  was  entirely  willing  to  be  held  reponsible  for 
his  proportionate  share  of  the  dimness.  He  believed  that  Repub- 
li:an  voters  were  too  intelligent  and  too  fair-minded  to  look  upon 
simple  justice  to  corporations  as  criminal  generosity  to  thevsame; 
and  certainly  it  was  a  cowardly  thing  and  an  unjust  thing,  after 
killing  the  tax  code  in  its  drastic  assaults  on  every  other  class  of 
property  to  try  to  enact  it  as  against  corporate  interests  only.  As 


278  HERTIG    ON    TAXATION. 

for  him,  he  favored  a  gross  earnings  tax,  and  one  or  two  senators 
vehemently  favoring  this  bill  had  formerly  stood  with  him  on 
that  proposition. 

Ives  (Dem.),  of  Ramsey,  said  that,  after  microscopic  re- 
search, he  had  failed  to  find  any  obligation  on  the  legislature  to 
vote  for  some  bill,  any  bill  that  might  be  passed,  merely  because  it 
was  a  tax  bill,  and  because  this  was  supposed  to  be  a  tax  session. 

The  law  creating  the  tax  commission  had  instructed  that  body 
to  report  a  complete  system  of  taxation.  No  such  system  had 
been  presented  to  the  senate,  and  it  was  not  his  province  to  discuss 
what  had  been  done  and  undone  in  the  other  branch  of  the  legis- 
lature. The  bill  now  under  discussion  and  before  the  senate 
would  create  a  tax  commission  with  nothing  to  do ;  and  he,  there- 
fore, could  not  even  support  that  feature  of  the  bill,  much  as  he 
admired  and  enjoyed  dignified  leisure.  Where  even  the  friends  of 
the  measure  admitted  the  necessity  of  curing  its  drastic  and  un- 
fair provisions,  he  thought  that  before  it  could  be  amended  with 
something  drastic  and  fair  to  the  satisfaction  of  this  body,  the 
senate  would  be  reminded  of  the  two-headed  ram  that  had  more 
fights  on  hand  than  he  could  attend  to.  He  was  not  so  partisan  as 
to  withhold  from  his  Republican  friends  a  word  of  good  cheer. 
It  might  indeed  be  a  melancholy  spectacle  for  the  Republicans  to 
see  a  great  party  die ;  but  if  this  p  -eclicted  funeral  of  theirs 
should  be  held  because  of  a  Republican  legislature  discreetly  turn- 
.ing  down  this  bill,  it  was  already  past  praying  for,  and  the  hearses 
might  as  well  be  ordered  before  the  vote  was  taken !  If  the 
thought  should  occur  to  the  weeping  mourners  that  no  party  really 
great  could  catch  cold  and  die  so  easily,  it  was  not  for  him  to  say 
that  eleventh  hour  wisdom  was  of  no  avail — perhaps  here,  too, 
the  old  saw,  "better  late  than  never,"  would  apply. 

Sheehan  (Rep.),  of  Ramsey,  said  that  this  was  certainly  not 
one  of  those  cases  where  the  senate  should  reverse  the  report  of  its 
committee.  The  measure  as  it  stood,  was,  on  the  subjects  to 
which  it  applied  much  more  drastic  even  than  the  tax  commis- 
sion's code.  He  did  not  share  in  the  fears  of  some  of  his  fellow 
Republicans.  The  people  expect  the  legislature  to  be  fair,  no 
matter  what  effect  it  may  have  on  any  political  party.  The  bill 
was  radically  wrong  and  rotten.  Laws  now  in  force  are  ade- 
quate for  fair  and  equal  taxation. 

Thompson  (Rep.),  of  Fillmore,  favored  putting  the  bill  on 
General  Orders.  He  was  a  citizen  of  the  state  first,  and  then  a 
Republican  ;  as  citizen  and  Republican  he  was  for  fair  and  equita- 
ble taxation.  The  big  corporations  were  not  bearing  their  share 
of  the  tax  burdens  and  the  people  were  suffering  accordingly. 
He  urged  the  city  members  to  carefully  consider  their  own  in- 


HERTIG    ON     TAXATION.  279 

terests,  and  support  legislation  to  bring  corporations  under  proper 
regulation  and  within  reach  of  the  law.  He  would  favor  any  and 
all  amendments  that  would  improve  the  bill,  and  there  was  no 
better  time  than  now  to  go  on  in  the  work  of  tax  reform. 

Underleak  (Rep.),  of  Olmsted,  said  that  the  code  proposed 
by  the  tax  commission  should  have  been  enacted  as  a  whole.  With 
that  code  defeated,  there  was  really  nothing  left  for  the  senate  to 
consider.  The  question  ought  to  be  divested  of  all  partisanship, 
and  the  present  measure  considered  on  its  merits— if  it  had  any. 
He  should  vote  to  sustain  the  majority  report. 

Horton  (Rep.),  of  Ramsey,  said  that  he,  too,  would  have 
voted  for  the  commission's  proposed  code,  had  it  come  to  the 
Senate,  but  it  had  not  come.  There  was  no  party  obligation  in- 
volved in  the  present  measure.  That  obligation  had  ended  when 
the  tax  code  was  defeated  in  the  house.  There  was  no  obligation 
to  support  "a  bastard  bill  emanating  from  unknown  sources." 

Brower  (Rep.),  of  Stearns,  made  an  impassioned  speech  in 
favor  of  the  minority  report.  "This  is  not,"  said  he  in  substance, 
"a  mere  party  question ;  it  is  a  question  far  above  party — a  ques- 
tion which  the  good  men  of  all  parties  will  unite  in  viewing 
through  the  higher,  purer  atmosphere  of  that  citizenship  which 
thinks  only  of  the  general  welfare.  The  great  issue  is  tax  re- 
form in  all  its  phases,  not  merely  a  franchise  tax  bill ;  and  the  one 
phase  of  that  great  issue  now  before  us,  is  not  whether  we  here 
and  now  have  the  opportunity  for  inaugurating  all  at  once  a  gen- 
eral tax  reform ;  but  whether  we  are  brave  enough — nay,  I  dare 
maintain — patriotic  enough,  to  use  the  present  opportunity  for 
doing  what  we  can  and  reforming  to  the  extent  that  we  may. 
Every  platform,  and  every  rostrum  about  which  an  audience 
gathers — is  made  to  ring  with  declamation  of  the  people's  rights. 
I  tell  you  the  people  are  beginning  to  think  it  stran.ee  that  the  only 
lukewarm  voices  concerning  their  rights  are  heard  in  the  legisla- 
ture. For  myself,  I  have  confidence  in  the  integrity,  in  the  good 
will,  in  the  abilitv  of  this  legislature  and  this  senate.  I  do  not 
believe  that  the  discussions  we  have  had,  the  arguments  we  have 
heard,  the  facts  that  have  been  presented  before  us  and  before  our 
committees  have  been  lost — still  less  do  I  believe  that  they  should 
be  lost  by  our  failure  to  grapple  with  the  problems  of  taxation 
to  the  full  extent  of  our  present  opportunity.  It  is  one  thing  and 
I  concede,  a  proper  thing,  to  point  out  the  faults  of  this  measure 
as  it  stands  ;  it  is  another  thing,  but  a  proper  thing  also  and  an  im- 
perative thing,  to  make  this  bill  by  amendments  what  it  should  be, 
(even  to  the  making  of  a  substantially  new  bill),  and  thereby  re- 
deem to  the  people  the  pledges  of  the  legislature." 

Ryder  (Rep.),  of  Polk,  said:    "This  is  not  the  bill  the  legis- 


280  HERTIG    ON     TAXATION. 

lature  was  called  on  to  pass,  but  a  bunco  measure.  I  certainly  am 
not  afraid  of  the  political  consequences  if  we  fail  to  pass  it." 

Fitzpatrick  (Dem.),  of  Winona,  said:  "As  a  Democrat,  I  do 
not  believe  in  interfering  in  family  quarrels,  and,  as  a  general 
thing,  I  have  no  desire  to  work  for  the  salvation  of  the  Republi- 
can party.  But  now  if  the  success  of  this  bill  will  save  that  party, 
I  am  entirely  willing  that  my  Republican  friends,  or  enemies, 
should  have  that  measure  of  relief.  Besides  I  want  to  see  on  the 
statute  book  some  small  souvenir  of  the  great  wave  of  tax  reform 
that  swelled  high  in  1901,  and  is  dashed  mostly  to  spray  in  1902." 

Snyder  now  moved  the  previous  question,  which  was  there- 
upon duly  put  to  vote :  "Shall  the  report  of  the  minority  be  sub- 
stituted for  that  of  the  majority  ?"  And  the  roll  being  called,  there 
were  yeas  28  and  nays  35,  as  follows : 

Yeas:  Baldwin  (Demo- Pop.),  Barber  (Rep.),  Batz  (Dem.), 
Benedict  (Rep.),  Brower  (Rep.),  Fitzpatrick  (Dem.),  Gause- 
witz  (Dem.),  Grindeland  (Rep.),  Halvorson  (Rep.),  Jepson 
"Rep.),  Knatvold  (Rep.),  Larson  (Rep.),  Lord  (Rep.),  Mc- 
Carthy (Rep.),  McGill  (Rep.),  McGovern  (Dem.),  Meilicke 
(Demo-Pop.),  Miller  (Rep.),  Myron  (Rep.),  Schaller  (Dem.), 
Schellbach  (Rep.),  Snyder  (Rep.),  Somerville  (Rep.),  Swening- 
sen  (Rep.),  Thompson  (Rep.),  Viesselman  (Dem.),  Wilson 
(Rep.),  Young  (Rep.), — 20  Republican  and  8  non-Republican 
votes. 

Nays:  Buckman  (Rep.),  Chilton  (Rep.),  Caller  (Dem.), 
Daly  (Pop.),  Dart  (Dem.),  Daugherty  (Rep.),  Dickey  (Rep.), 
Du  Toit  (Dem.),  Everett  (Dem.),  Greer  (Rep.),  Grue  (Pop.), 
Hawkins  (Rep.),  Horton  (Rep.),  Hospes  (Rep.),  Ives  (Dem.), 
Johnson  (Dem.),  Jones,  E.  J.  (Rep.),  Jones,  J.  D.  (Rep.),  Mc- 
Arthur  (Rep.),  McGowan  (Dem.),  McKusick  (Rep.),  McNamee 
(Dem.),  Nixon  (Rep.),  Potter  (Rep.),  Reeves  (Rep.),  Roverud 
(Rep.),  Ryder  (Rep.),  Sheehan  (Rep.),  Shell  (Rep,),  Sivright 
(Rep.),  Smith,  E.  E.  (Rep.),  Smith,  J.  H.  (Rep.),  Stockton 
(Rep.),  Stockwell  (Demo-Pop.),  Underleak  (Rep.), — 24  Repub- 
lican and  1 1  non-Republican  votes. 

There  were  no  absentees,  and  every  senator  voted. 

The  motion  to  substitute  the  minority  report  having  been  thus 
voted  down,  the  question  next  taken  was  on  the  adoption  of  the 
report  of  the  majority  of  the  tax  committee  recommending  in- 
definite postponement, — which  report  was  adopted,  yeas  37  and 
nays  26.  Baldwin  and  McGovern  who  did  not  favor  the  bill,  were 
willing  on  the  first  vote  to  put  the  bill  on  General  Orders,  and  let 
the  majority  then  have  a  chance  to  fashion  it  as  they  might ;  and 
seeing  the  substitute  motion  was  lost  they  recorded  their  opposi- 
tion to  the  bill  by  joining  the  majority  on  the  vote  to  postpone  in- 


HERTIG    ON     TAXATION.  281 

definitely.  With  these  exceptions  those  who  voted  yea  on  the  mo- 
tion to  substitute,  voted  nay  on  the  motion  to  postpone  in- 
definitely and  those  who  voted  nay  on  the  former  motion  voted  yea 
on  the  latter  one. 

Sheehan,  to  give  the  bill  its  final  quietus,  moved  that  "the 
vote  by  which  the  report  of  the  committee  on  taxes  and  tax  laws 
was  adopted,  and  House  File  Number  56  indefinitely  postponed, 
be  reconsidered."  The  motion  to  .reconsider  was  lost  by  yeas  26, 
nays  37 : — all  those  that  voted  yea  on-  the  motion  to  indefinitely 
postpone,  voted  nay  on  the  motion  to  reconsider  and  vice  versa. 
So  the  bill  was  killed  and  buried. 


CHAPTER  XVII. 


Minnesota  constitution  now  difficult  to  amend — Recent  attempts  to  obviate 
that  difficulty — A  paragraph  on  constitutional  conventions — Minnesota 
and  Ohio  courts  in  conflict  over  like  constitutional  plank — Rationale 
of  judge-made  law — Difference  between  limitations  on  power  of  con- 
gress and  those  on  power  of  state  legislatures — The  federal  Constitu- 
tion as  limiting  taxing  powers — What  might  result  if  either  federal  or 
state  government  could  tax  instrumentalities  of  the  other — Bentham 
on  abuse  of  taxing  legal  process — Nature  of  limitations  on  taxing 
power  of  congress — Proposed  constitutional  amendments  set  forth — 
Closed  and  "wide-open"  constitutions,  and  how  they  work  in  Pennsyl- 
vania and  elsewhere — Amendments  proposed  by  Atty.  General  Douglas 
and  others — Judiciary  committees  and  the  amendments  they  adopted — 
Analysis  of  same  and  mention  of  Jacobson  gross-earnings  law. 


In  November,  1898,  Minnesota  adopted  to  her  constitution  an 
amendment,  which  goes  far  toward  making  the  constitution  hence- 
forth as  unamendable .  in  practice  as  is  the  constitution  of  the 
United  States.  By  that  amendment,  the  legislature,  consonant 
with  the  general  practice  in  all  the  American  states  has  the  initia- 
tive, and  "whenever  a  majority  of  both  houses  of  the  legislature 
shall  deem  it  necessary  to  alter  or  amend  this  constitution,  they 
may  propose  such'  alterations  or  amendments,  which  shall  be  pub- 
lished with  the  laws  which  have  been  passed  at  the  same  session, 
and  said  amendments  shall  lie  submitted  to  the  people  for  their  ap- 
proval or  rejection  at  any  general  election,"  whereat  if  it  shall 
appear  "that  a  majoritv  of  all  the  electors  voting  *  *  *  shall 
have  voted  for  and  ratified  such  alterations  and  amendments,  the 
same  shall  be  voted  to  all  intents  and  purposes  as  a  part  of  this 
constitution."  This  does  not  mean  "a  majority  of  all  the  electors 
voting"  upon  the  amendments,  but  a  "majority  of  all  the  electors 
voting"  at  such  election  upon  any  matter  or  for  or  against  anv 
persons  on  any  "ticket."  As  now  all  ballots  cast  are  officially 
printed  and  uniform,  and  contain  all  questions  to  be  voted  on. 
together  with  the  names  of  all  the  candidates  that  are  officiallv 
recognized  for  the  different  offices, — there  are  ro  separate  bal- 
lots, and  the  whole  number  of  ballots  deposited  in  the  urns  deter- 


HERTIG    ON    TAXATION.  283 

mines  the  number  of  persons  voting  at  such  election.  Official  bal- 
lots are  long,  and  many  a  voter  finds  it  tedious  to  mark  with  a 
cross  his  choice  of  candidates  and  his  choice  between  questions, 
to  the  prolix  end  of  the  strip  of  paper  so,  as  aforesaid,  officially 
furnished.  Many  a  ballot  so  cast  shows  that  its  voter  had  not 
sufficient  interest  to  vote  for  a  candidate  for  every  office  named, 
but  voted  merely  on  governor  and  congressman,  and  may  be  on 
two  or  three  county  officers.  Constitutional  amendments,  seldom 
inspiring  a  burning  interest,  suffer  particularly  from  voters'  neg- 
lect. The  many  voters,  therefore,  who  do  not  vote  at  all  on  these 
amendments,  practically  vote  against  them,  since  the  blanks  and 
the  negatives,  alike  count  in  determining  whether  "a  majority  of 
all  the  electors  voting"  voted  in  the  affirmative.  Thus  the  inertia 
which  springs  from  indifference  is  found  to  be  the  real  balance 
of  power,  and  has  defeated  every  constitutional  amendment  that 
has  been  submitted  to  the  people  since  the  adoption  in  November, 
1898,  of  the  rule,  No  vote  on  equals  a  vote  against.  This  should 
not  be.  A  vote  for  should  be  presumed  to  result  from  a  certain 
interest  in  and  study  of.  If,  then,  a  majority  of  those  who  vote 
on  the  amendments  vote  for  them,  such  vote  should  be  held  suf- 
ficient to  establish  the  amendments.  The  indifferent,  and  conse- 
quently the  inert,  should  not  be  permitted  to  disfranchise  the 
striving  and  progressive  alert.  It  is  not,  of  course,  impossible  for 
an  amendment  to  embody  a  crafty  but  disguised  purpose  ;'nor  is  it 
impossible  for  the  promoters  of  such  an  amendment  and  such  a 
purpose  to  derive  aid  from  a  law  whereby  a  bare  majority  of  those 
voting  on  amendments  would  be  sufficient  to  establish  the  same. 
Such  a  case,  by  its  very  terms  not  likely  to  happen,  though  not 
quite  impossible  under  the  present  jurisprudence  and  modes  of 
government — would  work  no  irreparable  wrong,  and,  even  if  suc- 
cessful for  a  time,  would  bring  about  the  collateral  and  wholly  un- 
intended result  of  making  the  people  more  vigilant  in  the  scrutinv 
of  proposed  amendments.  Besides,  the  New  Jurisprudence  will 
devise  ways  and  means  to  make  it  practically  impossible  for 
roguery  to  hunt  cover  in  the  forms  of  law. 

At  the  special  session  of  Minnesota's  legislature  in  1902,  an 
unsuccessful  effort  was  made  to  submit  to  the  people  whether  they 
would  amend  or  not  the  present  rule  for  determining  the  ratifica- 
tion and  rejection  of  amendments  to  the  constitution.  Senator 
H.  J.  Miller  (Rep.),  of  Rock  county,  offered  in  the  body  to  which 
he  belongs  an  amendment  providing  that  of  those  voting  for  and 
against  such  ratification,  the  majority  so  voting  shall  determine 
the  adoption  or  rejection  of  the  amendment  voted  upon — disre- 
garding wholly  those  electors,  who  while  voting  at  the  same  elec- 
tion shall  have  neglected  to  vote  on  the  amendment  or  amendments 


284  HERTIG    ON    TAXATION. 

then  and  there  proposed.  Miller's  bill,  "Senate  File  Number 
Eighty,"  was  passed  by  the  Senate,  on  March  5th,  in  a  rather  list- 
less session — eleven  senators  being  absent.  There  were  36  yeas 
and  1 6  nays.  Of  the  nay  votes,  half  were  Republican  and  half 
Democrat.  Of  the  yea  vote,  31  were  Republican,  3  Democrat  and 
2  Populist. 

When  the  bill  reached  the  House,  it  was  referred  to  the  judi- 
ciary committee  which  failed  to  make  report  on  it,  and  so  the 
measure  was  killed.  It  found  in  the  House  a  zealous  champion 
in  Nichols  (Rep.),  of  Pipestone  county,  who  made  strenuous  ef- 
forts to  get  it  considered — his  last  but  one  (on  the  last  active  day 
of  the  session)  taking  the  form  of .  a  motion  "that  Senate  File  80 
be  recalled  from  the  judiciary  committee,"  which  motion  was  lost 
on  the  tie  vote  of  47  to  47.  The  yea  votes  were  35  Republican, 
and  12  non-Republican.  The  nay  votes  were  40  Republican  and 
7  non-Republican.  Of  these  last  6  were  Democrat  and  I  Popu- 
list,— all  the  other  Populists  having  voted  yea.  Thus,  as  it  hap- 
pened, Republicans,  Democrats  and  Populists  each  held  the  bal- 
ance of  power  on  this  vote. 

Nichols  was  not  yet  quite  defeated.  He  had  previously  intro- 
duced "House  File  87,"  a  bill  much  like  Senator  Miller's,  had 
worked  it  through  committee,  and  now,  with  Miller's  bill  smoth- 
ered, his  own  in  the  forenoon  of  March  10,  "was  read  the  third 
time,"  arid  the  "question  taken"  on  its  passage.  There  was  time 
yet  to  rush  it  to  the  Senate,  and  perhaps  to  get  it  passed  there,  if 
the  House  should  take  favorable  action.  It  was  not  to  be ;  the 
House  voted  it  down  by  yeas  45  and  nays  52. 

It  was  apparent  from  the  outset  that  amendment  and  revision 
of  the  constitution  would  be  subjects  of  much  attention  last  win- 
ter on  the  part  of  the  Minnesota  legislature.  The  tax  commis- 
sion, as  in  duty  bound,  offered  important  amendments,  and  the 
judiciary  committees  of  the  House  and  Senate  respectively 
wrestled  with  these  and  with  various  other  proposed  amendments. 
In  the  House,  Smith  (Rep.),  of  Hennepin,  introduced  early  in 
the  session  a  bill  (House  File  12)  for  a  constitutional  convention. 
This  was  not  put  to  vote  until  near  final  adjournment,  when 
(March  7th)  it  passed  the  House  by  90  yeas  and  n  nays.  Among 
the  nays  were  two  Democrats  and  one  Populist.  The  majority 
vote,  examined  in  detail,  shows  that  not  only  the  great  mass  of 
Republicans  in  the  popular  body  favored  a  constitutional  conven- 
tion, but  that  a  majority  of  the  Democrats  and  Populists  also  fa- 
vored it.  The  Senate  smothered  the  bill,  and  not  unwisely ;  there 
is  need  of  a  campaign  of  education,  in  any  event,  before  the  calling 
of  a  constitutional  convention,  and  there  is  at  least  a  fair  show 
to  accomplish  by  amendments  substantially  all  that  such  con- 


HERTIG     ON     TAXATION.  285 

vention  would,  and  at  a  saving  of  $100,000  to  the  state  or  there- 
abouts. Constitutional  conventions  easily  become  two-edged ;  and 
in  our  present  state  of  emotional  and  intellectual  anarchy — I  bor- 
row the  word  approximately  in  Comte's  sense — they  are  rather 
more  likely  to  produce  results  displeasing  to  the  many  than  to  the 
few.  I  have  not  yet  analyzed  the  new  constitution  of  Alabama  ;v 
but  pending  the  late  convention  there  a  conservative  citizen  of  that 
state  assured  me  that  special  interests  would  hold  the  convention 
well  in  hand ;  and  it  is  matter  of  notoriety  that  zealous  friends  of 
the  people  fear  to  urge  the  calling  of  a  convention  to  revise  the 
constitution  of  Illinois,  lest  sinister  designs  control  its  work. 
Under  the  protection  of  the  New  Jurisprudence,  constitutional 
conventions  will  be  mi  rhty  and  beneficent  organs  of  the  people. 
The  vote  on  Smith's  bill  (House  File  12)  is  interesting,  however, 
as  reflecting  a  state  of  unrest  in  the  popular  body  of  the  Minne- 
sota legislature. 

The  amendments  which  became  a  subject  of  struggle  in  both 
branches  of  the  legislature,  grew  out  of  those  suggested  and  rec- 
ommended by  the  tax  commission  and  were  confined  to  the  subject 
of  taxation.  The  commission  in  their  Report  (pp.  52-3)  set  forth 
their  firm  conviction  of  the  necessity  of  amendment,  and  men- 
tioned in  partial  support  of  such  conviction  the  "great  changes 
and  developments"  which  have  taken  place  in  the  industrial  world, 
"since  the  adoption  of  the  original  constitution," — both  the  sub- 
jects and  objects  of  taxation,  differing  now,  in  many  respects, 
from  what  they  were  then. 

"Following"  industriously  in  the  footsteps  of  other  states  [that 
is,  of  most  of  the  other  states  in  the  Union],  in  the  formulation  of 
its  organic  law  [that  is,  in  the  make-up  of  its  constitution],' this 
state  adopted  the  policy  of  depriving  the  legislature  of  powers 
touching  taxation  which  are  essential  to  the  natural  growth  and 
development -of  a  revenue  system." — Report  of  the  Tax  Commis- 
sion, p.  53.  In  thus  stating  that  the  Minnesota  legislature  is  re- 
strained by  the  state  constitution  from  the  use  of  a  free  hand  in 
tax  matters,  the  commission  failed  to  add  that  the  supreme  court 
of  the  North  Star  state  has  upheld  the  letter  of  the  constitution, 
as  regards  tax  matters,  with  rather  more  than  average  judicial 
fidelity,  and  has  declared  many  a  tax  law  to  be  unconstitutional. 
However,  in  the  case  of  the  State  v.  Moffeft,  64  Minn.  292,  the 
court  made  bold  to  sustain  a  striking  departure  from  the  letter 
of  the  constitution,  ("laws  shall  be  passed  taxing  all  moneys, 
credits,"  etc.),  and  to  uphold  sec.  1526,  of  the  General  Statutes  of 
1894,  authorizing  the  deduction  of  bona  fide  debts  from  the  gross 
amount  of  taxable  "credits,"  in  determining  the  sum  of  the  latter 
which  should  be  assessed  to  any  particular  victim  who  fails  to 


286  HERTIG    ON     TAXATION. 

make  a  clean  escape.  The  court  put  its  decision  on  the  ground 
that  this  particular  infraction  of  the  constitution  had  been  repeat- 
ing itself  in  the  uniform  practice  of  assessors  and  equalization 
boards  under  the  same  or  a  like"  statute,  ever  since  assessing  and 
taxing  had  been  going  on  in  this  state,  though  an  attorney  general 
had  held  as  early  as  1864  (Opinions,  ed.  1858-84,  pp.  148-150), 
that  such  statute  is  unconstitutional ;  and  that  this  practical  con- 
struction long  ago  given  to  the  constitution,  and  since  then  uni- 
formly acquiesced  in,  sets  the  seal  of  constitutionality  to  the  stat- 
ute which  lends  the  form  of  law  to  such  construction  and  ac- 
quiescence. The  supreme  court  of  Ohio  did  not  hesitate  to  de- 
clare void  a  like  statute,  under  a  like  constitution. — Exchange 
Bank  of  Columbus  v.  Mines j  3  Ohio  St.  I,  (decided  in  1853). 

In  fact  section  3,  of  article  IX.  of  the  Minnesota  constitution 
is  practically  a  literal  copy  of  section  2,  of  article  XII.  of  the  Ohio 
constitution  (still  in  force  there),  adopted  in  1851.  The  Minne- 
sota copyists  omitted  after  the  word  "taxing,"  in  the  first  line,  the 
Ohio  words  "by  a  uniform  rule"  but  retained  the  legal  effect  there- 
of by  their  wording  of  the  first  clause  of  section i,  of  article  IX. 
(See  sees.  I  2,  3  and  4,  of  article  IX.  as  set  forth  below  in  full, 
in  this  ch.)  Minnesota  has  "public  burying  grounds,"  where 
Ohio  has  simply  burying  grounds,  and  has  "shall"  after  "individu- 
al," where  Ohio  has  "may."  There  are  no  other  differences.  And 
section  1526  of  the  Minnesota  General  Statutes  of  1894,  held  con- 
stitutional in  Moffet  v.  State,  above,  is  almost  a  copy  of  the  loth 
section  of  the  Ohio  tax  law  of  April  I3th,  1853,  which  particular 
section  of  the  Ohio  tax  law  the  supreme  court  of  that  state  held 
to  be  unconstitutional  and  void  in  Bank  of  Columbus  v.  Mines, 
above.  The  Ohio  court  quoting  from  section  2,  of  article  XII., 
of  that  state's  constitution,  the  words  "Laws  shall  be  passed  tax- 
ing, by  a  uniform  rule,  all  moneys,  credits,"  etc.,  gave  to  those 
words  their  plain,  literal  and  palpable  effect,  as  follows :  "The 
manifest  effect  of  this  constitutional  provision,  is  to  make  prop- 
erty the  basis,  and  the  sole  basis  of  taxation."  Therefore,  credits 
being  property,  and  there  being  no  words  authorizing  their  ex- 
emption in  the  Ohio  constitution,  the  statute  purporting  to  author- 
ize the  deduction  "from  the  gross  amount  of  money  and  credits" 
[otherwise  taxable]  of  "the  amount  of  all  bona  fide  debts  owing" 
by  the  person  listing  his  property  for  taxation, — is  unconstitu- 
tional and  void.  Why,  then,  in  Minnesota,  under  a  constitution 
having  almost  Ohio's  very  words,  and  certainly  Ohio's  very  in- 
tent, should  a  like  statute,  allowing  the  deduction  of  debts  from 
credits  be  held  constitutional? 

The  question  just  asked  is  of  tremendous  importance.  It  opens 
the  flood-gates  to  the  great  volume  of  criticism  loosened  by  Ben- 


HERTIG    ON    TAXATION.  287 

tham  and  swelled  by  others,  after  him,  against  judge-made  law, 
or  as  Bentham  derisively  called  it  "dog  law" ;  it  gives  the  floor  to 
those  who  defend  judge-made  law  as  of  practical  necessity,  and, 
for  highly  important  instance,  to  those  who,  like  John  H.  Hop- 
kins, in  the  Southern  Law  Review  for  November,  1901,  argue 
that  by  judge-made  law  the  Constitution  of  the  United  States  has 
been  pried  off  its  written  base,  and  set  adrift  toward  goals  which 
give  alarm  or  joy,  according  to  the  different  views  and  tempers  of 
those  who  no.te  the  fact.  Judges  and  lawyers  accept  the  fact  and 
the  necessity  of  judge-made  law  in  much  the  same  temper  and 
with  much,  the  same  serenity  that  they  bring  to  the  ''taxation  of 
costs" ;  there  may  be  grave  or  shrill  dissatisfaction  over  particular 
case  or  item,  none  over  cases  and  items  as  such.  The  New 
Jurisprudence  will  accept  the  fact  and  admit  the  necessity,  with 
the  important  qualification  that  both  can,  "and  of  right  ought  to 
be,"  largely  and  strikingly  reduced.  Meantime  the  practical  situ- 
ation remains,  that  our  constitution  and  laws,  invite  and  even 
demand  a  vast  supplementary  body  of  judge-made  law,  from  the 
fact  that  they  are  based,  as  to  some  important  feature  or  features 
in  them,  as  a  whole,  upon  the  five-fold  foundation  of : 

1.  Compromise  sections,  planks,  clauses,  or  words,  adopted 
because  otherwise  the  subject  in  hand  must  have  been  passed  over 
in  silence,  or  pointed  to  precise  and,  to  some  minds,  displeasing 
ends.     [Such  sections,  planks,  clauses  and  words  always  militate 
against  certainty  and  precision.     The  Constitution  of  the  United 
States  is  conspicuous  for  planks  born  of  compromise.     It  is,  how- 
ever; very  conspicuous  also  for  the  superior  style  in  which  it  is 
written,  due  to  the  fact  that  one  man,  Gouverneur  Morris,  was 
chief  scrivener  of  "the  Committee  on  Style"   which  .gave  final 
shape  and  finishing  touches  to  the  matter  which  the  convention 
had  agreed  to.     Morris  could  write,  and  here  and  there  the  polish 
he  put  on  seems  to  have  gone  far  below  the  surface  and  taken 
the  mould  of  original  fibre.] 

2.  A  foolish  straining  after  sham  originality.    Because  of  this 
many  a  clever  and  many  a  clumsy  scrivener  have  not  been  con- 
tent to  copy  word  for  word  the  particular  section  or  article  of  a 
constitution  or  statute  previously  adopted  or  enacted  in  their  own 
or  some  other  state,  and  which  section  or  article  won  the  scrive- 
ner's approval  for  substance  and  nearly  so  for  form ;  but.  instead 
of  an  exact  copy,  such  scrivener  has  made  an  approximate  copy, 
left  out  something  of  his  original  or  added  "new  matter"  of  his 
own  sufficient  for  courts  afterwards  to  "distinguish"  the  legal  ef- 
fect of  the  whole,  so  approximately  copied  and  varied,  from  the 
received  and  accredited  legal  effect  of  the  particular  section  or 
article  from  which  such  approximate  copy  was  made. 


288  HERTIG  ON  TAXATION. 

3.  Amendments  offered  and  passed  with  much  the  same  mo- 
tive, and  much  the  same  result,  as  that  set  forth  in  the  last  pre- 
ceding paragraph;   and  amendments  offered    (slight  in   appear- 
ance to  all  except  a  profound  expert),  to  give  a  sinister  twist  to 
what  otherwise  would  have  been  straight.      [In  the  field  outlined 
in  this  and  in  paragraph  2,  folly  plays  into  the  hand  of  cunning ; 
and  in  particular  cases  it   is  often  difficult  to  determine  which 
reaps  the  greater  quantitative  harvest.     To  a  subdivision  of  this 
field  easy  to  add  belongs  the  mischief  caused  by  amendments  of- 
fered hastily,  but  offered  in  good  faith  and  accepted* in  good  faith, 
in  the  last  hours  of  a  legislative  session.    The  fate  of  "House  File 
57"  is  good  for  illustrative  example,  as  above  mentioned.] 

4.  Fear  of  the  people  in  mass  and  fear  of  their  elective  repre- 
sentatives, which  fears  have  been,  and  are,  characteristic  of  all  the 
constitutions  as  well  of  the  United,  as  of  the  several,  states.      [By 
this  fear,  and  the  restrictions  of  it  begotten,  amendment  of  consti- 
tutions and  the  adoption  of  new  ones  has  been  rendered  difficult 
and  in  some  cases  practically  impossible.     The  good  prohibition- 
ist, for  instance,  would  doubtless  prefer  to  violate  his  principles 
and  his  personal  constitution  by  drinking,  martyr-like,  a  jorum 
or  two  of  whiskey  daily,  if  he  could  not  otherwise  prevent  the 
"resubmission"  to  the  people  of  a  prohibition  clause  in  his  state's 
constitution  after  the  same  has  been  once  affirmatively  adopted. 
It  must,  however,  be   said  in  justice  to  American  constitution- 
makers  that  they  need  not,  in  general,  lay  to  their  souls  the  smart- 
ing Shakespearian  unction, 

"Thus  conscience  doth  make  cowards  of  us  all" ; 
for  their  fear  is  lest,  with  door  left  open  for  sudden  rush,  the  peo- 
ple should  rashly  undo  to  their  own  hurt  some  piece  of  constitu- 
tion-making, itself  completed  only  after  much  labor  and  the  ex- 
penditure o<f  $100,000  or  more  by  the 'state.  Besides  it  must  be 
conceded  that  now,  very  powerful,  very  cunning,  and  very  selfish 
interests  are  on  the  look-out  prior  to  and  in  every  constitutional 
convention,  to  shield  themselves  as  well  as  may  be  for  offense  and 
defense.] 

5.  The  inherent  difficulty  of  covering  with  general  words  in 
constitution  and  other  written  law  all  the  particular  cases  which 
shall  arise ;  and  herein  the  tremendous  sub-difficulty  of  laying  on 
constitutional  restraint  which  shall  be  duly  operative  for  padded 
neck  and  not  unduly  operative  for  galled  withers.      [When,  for 
instance,  constitution  fails  to  fit  case  which  it  did  not  forsee,  and 
could  not;  or  fails  to  fit  cases  which  it  ought  to  have  foreseen,  and 
might  have  foreseen  but  for  incompetence  of  its  framers,  or  fore- 
seeing did  not  cover  by  reason  of  clerical  slip,  or  "by  reason  of 
many-voiced,  discordant  babble,  sometimes  by  reason   of  clear- 


HERTIG    ON     TAXATION.  289 

voiced,  opposing  interests,  then  in  these  cases  or  any  one  of  them, 
the  door  stands  open  for  "construction"  and  resulting  judge-made 
law.] 

Meanwhile,  and  pending  the  many  substantial  reductions 
which  the  New  Jurisprudence  will  work  in  the  range  and  effects 
of  the  foregoing  conditions,  and  of  such  other  sub-causes  and  con- 
ditions Avhich  co-operate  with  them, — it  must  not  be  forgotten 
that  judge-made  law  is  an  instrument,  which  like  any  other  under 
discreet  and  just  guidance,  may  be  made  to  do  yeoman  service  for 
the  people.  The  right  organ  for  carrying  out  the  people's  will, 
the  right  conception  of  political  justice,  and  the  right  skill  in 
carrying  such  conception  into  every  walk  of  civil  life — these  are 
now  the  great  desiderata,  or  to  adapt  a  Baconian  expression,  the 
great  table  of  deficients.  The  Civil  Nation  shall  be  such  organ, 
and  its  New  Jurisprudence  shall  furnish  and  apply  the  right  con- 
ception of  justice.  The  highest  possible  ideal  of  a  written  code 
is  that  it  shall  be  so  plain  as  to  preclude  all  ambiguous  interpreta- 
tions and  applications  ;  so  just  in  intent  and  so  far-seeing  in  pre- 
vision that  it  will' be  permanent.  In  practice,  and  as  enacted,  we 
find  codes  that  are  the  very  opposite  of  such  ideal ;  codes  again 
that  in  some  measure,  in  some  parts,  approximate  it.  If  the  ideal 
lies  beyond  our  grasp,  beyond  the  limits  of  complete  readability, 
— the  field  of  approximation  promises  noble  and  exhaustless  har- 
vests to  the  right  culture. 

Now  the  written  law  of  the  Ohio  constitution,  as  above  quoted 
and  construed  by  the  supreme  court  of  that  state,  in  Exchange 
Bank  of  Columbus  v.  Hincs,  3  Ohio  St.  i — is  plain  in  expression, 
just  in  intent  and  dim-sighted  in  preyision.  Lacking,  then,  in  one 
of  the  elements  of  permanence,  it  invites  the  legislature  and  the 
people  to  its  violation,  and  invites  the  courts  to  wrench  awry  the 
plain  letter  of  its  meaning.  But  when  the  Ohio  court  was  called 
upon  to  so  wrench,  the  constitution  there,  of  1857,  was  only  two' 
years  old,  and  the  statute  violating  it  had  just  been  passed.  Most 
courts  are  averse  to  pioneering,  to  taking  the  initial  steps  in  a  de- 
parture from  marked  path  ;  most  courts  require  a  decent  pretext  for 
doing  the  new  right  thing  or  the  new  wrong  thing.  An  ancient 
legal  maxim  is,  "The  wrong  step,  when  everybody  maketh  it,  is  a 
legal  step,"  or  as  it  is  usually  quoted  Communis  effor  fatit  jus. 
An  acquiescence  in  the  meaning1  and  practical  effect  of  any  written 
law  or  body  of  law,  when  the  people  and  their  officials  alike  unite 
in  such  acquiescence  until  it  grows  the  moss  of  custom, — gives  the 
force  of  law  to  the  meaning  and  practical  effect  so  acquiesced  in ; 
custom  at  last  erows  its  mosses  and  puts  its  authoritative  glosses 
on  every  code  that  is  not  repealed  or  substantially  chano-ed,  before 
the  lapsing  of  the  time  necessary  to  the  development  of  custom's 


290  HERTIG    ON    TAXATION. 

work.  The  Ohio  court  simply  declined  to  sanction  a  plain  breach 
of  a  new  constitution,  declined  to  pioneer ;  while  the  Minnesota 
court,  for  which  lapse  of  time  and  path  worn  bare  by  transgres- 
sors' feet  had  taken  away  all  question  and  all  opportunity  of  pio- 
neering,— had,  in  construing  the  same  question  under  substantial- 
ly like  constitution,  only  to  register  the  people's  will  as  evidenced 
by  their  customary  "construction,"  or  rather  violation  of  the  state 
constitution.  And  the  Minnesota  court  did  so  register  by  giving 
a  decision  just  the  reverse  of  that  rendered  by  the  Ohio  court. 

Waiving  the  standpoint  of  rigid  theoretical  exactness,  and 
waiving  all  speculative  consideration  as  to  what  our  jurisprudence 
might,  could,  would  or  should  have  been,  if  American  courts  had 
uniformly  and  precisely  followed  the  plain  letter  of  code  and  con- 
stitution— a  speculative  consideration,  for  the  rest,  which  would 
be  wholly  barren  in  view  of  the  fact  that  the  constitution  of  the 
Anglo-Saxon  mind  is  such  that  as  between  break  in  formal  prin- 
ciple and  break  in  practical  result,  it  chooses  generally  the  former. 
— I  may  say  that,  in  a  certain  practical  sense,  each  the  Ohio  and 
the  Minnesota  court  was  right, — the  Ohio  tribunal  in  declaring 
the  constitution  before  custom  had  modified  the  letter  of  it.  the 
Minnesota  one  in  giving  judicial  sanction  to  an  unconstitutional 
law  which  unbroken  custom  for'  forty  years  had  converted  into  a 
proper  interpretation  of  the  constitution.  But  now  if,  conform- 
ing to  the  practical  interpretation  given  to  the  constitution  and 
the  tax  code  that  has  grown  up  under  it, — both  little  changed  in 
essential  features  these  forty  years,  except  as  modified  by  the 
customary  practical  effect  given  to  them, — the  legislature  should 
boldly  take  the  view — one,  for  the  rest,  easily  justified — that  all  tax 
laws  that  are  permitted  to  work  undisturbed  for  a  few  years,  tend 
to,  and  in  so  far  as  effective  do,  levy  income  taxes  very  much  less 
than  three  per  cent  of  the  capital  value  of  the  property,  affected ; 
and  if  thereupon  the  legislature  should  proceed  to  enact  laws  giv- 
ing effect  to  the  uniformity  and  equality  clauses  of  the  constitu- 
tion, only  in  so  far  as  practice  and  custom  have  made  them  effec- 
tive,— holding  for  instance,  and  enacting  in  accordance  with  so 
holding,  that"  a  small,  but  collectible  tax  on  mortgages  and  other 
credits,  say  *4  of  I  per  cent,  and  the  like  tax  on  grain  in  elevators, 
say  1-5  of  i  cent  per  bushel,  afford  a  much  closer  approach  to 
constitutional  equality  and  uniformity,  than  a  3  per  cent  rate  on 
a  nominal  "full  and  true  value"  assessment  does, — the  real  novelty 
in  .a  supreme  court  decision  sustaining  such  legislation,  should 
one  be  rendered  by  the  Minnesota  or  any  supreme  court,  would 
not  be  a  novelty  of  principle  engrafted  on  a  dearth  of  precedent, 
but  a  novelty  of  boldness  in  consistent  following  of  principle.  As 
a  frequent  thing  in  jurisprudence,  the  controlling  principles  of 


HERTIG     ON    TAXATION.  291 

decisions  are  put  forth -as  one  puts  up  a  "shack"  on  a  claim — 
good  to  camp  in  for  a  little  while,  but  not  for  permanent  abode. 
Not  for  American  judges  the  Emersonian  hobgoblin  of  "a  foolish 
consistency." 

It  is  important  to  remember  that  the  legislature  of  a  state 
in  the  American  Union  may  do  in  a  legislative  way  all  that  the 
state  as  a  whole  can  do  in  that  way,  and  without  reserve  or  re- 
straint except  as  imposed  by  the  state  constitution.  As  the  tax 
commission  put  it,  "A  state  legislature  is  deemed  to  have  plenary 
power  upon  all  subjects  of  legislation,  save  as  it  has  been  de- 
prived thereof  by  constitutional  restrictions." — Report,  p.  53.' 
There  is  thus  a  great  distinction  between  the  kind  of  limitation 
on  the  powers  of  the  federal  congress  and  the  kind  of  limitation 
on  the  powers  of  a  state  legislature.  Congress  had  and  has  no 
original  fount  of  theoretical  sovereignty  in  its  own  representative 
right  to  draw  from ;  every  state  legislature  had  and  has  such  theo- 
retical fount  as  full  and  exhaustless  as  the  power  of  the  people  of 
its  state.  Congress  has,  therefore,  just  the' powers,  and  no  more, 
which  the  Constitution  of  the  United  States  has  given  to  that 
body';  and  every  state  legislature  has  all  the  powers  of  legislation 
which  have  not  been  expressly  or  impliedly  withheld  from  it. 
Congress  must  find  as  warrant  for  its  power  the  express  or  im- 
plied letter  of  a  grant  of  such  power  ;  state  legislatures  go  lawfully 
ahead  unless  impeded  by  express  or  implied  negation  of  their 
powers.  But  such  negation  is  found  as  well  in  the  Constitution  of 
the  United  States  as  in  the  constitutions'  of  the  several  states. 

The  principal  negations  on  the  power  of  the  states,  which 
means  in  practice  on  the  power  of  the  state  legislatures, — the  ne- 
gations, I  mean,  imposed  by  the  Constitution  of  the  United  States, 
in  so  far  as  said  negations  give  rise  directly  or  indirectly  to  ques- 
tions involving  the  power  of  the  states  to  levy  taxes, — are : 

1.  "No  state  shall     *"-*..*     pass   any     *     *  law  im- 
pairing the  obligation  of  contracts." — Const,  of  U.  S.,  Art.  I,  Sec. 
10.     [A  good  illustration  of  how  this  clause  may  affect  the  power 
of  a  state  to  impose  taxes  is  shown  above  (pp.  107-119)  in  refer- 
ence to  the  gross  earnings  tax  on  Minnesota  railroads.] 

2.  "No  state  shall,  without  the  consent  of  Congress,  levy  any 
imposts  or  duties  on  imports  or  exports,  except  what  may  be  ab- 
solutely   necessary    for    executing    its    inspection    laws." — Ibid. 
[Maryland,  in  1821,  passed  a  statute  imposing  a  license  of  $50.00 
on  "all  importers  of  foreign  commodities."  This  act  was  held  void 
as  in  conflict  with  the  clause  quoted  in  this  paragraph,  and  also 
as  in  conflict  \villi  the  commercial  clause  quoted  below  as  No.  3. — 
Bro^-n  v.  MaryJand,  12  Wheat.  419.     A  tax  on  the  occupation  of 


292  HERTIG    ON     TAXATION. 

ah  importer  is  a  tax  on  importation.-— 7W.  So  also  the  supremo 
court  of  the  United  States  held  to  be  unconstitutional,  as  in  con- 
flict with  the  clause  in  this  paragraph  quoted,  a  statute  of  'Cali- 
fornia, imposing  a  stamp  tax  upon  hills  of  lading  for  gold  or 
silver  transported  from  any  point  or  place  in  that  state  to  any  point 
or  place  without  the  state. — Almy  v.  California,  24  Howard,  169. 
A  tax  on  an  export  bill  of  lading  is  in  fact  a  tax  on  the  commodity 
exported. — Id.] 

3.  "Congress  shall  have  power  to  regulate  commerce  with 
foreign  nations  and  among  the  several  states." — Id.,  Art.  I.  Sec. 
8.  [This  clause  of  the  United  States  Constitution  has  been  up- 
held and  enforced  by  the  federal  supreme  court  more  literally  and 
perhaps  with  farther  reaching  consequences  than  any  other  im- 
portant clause  of  that  justly  celebrated  instrument.  The  innate 
tendency  of  human  nature  to  resort  to  some  form  of  "protection" 
has  been  repeatedly  and  powerfully  illustrated  in  the  many  stat- 
utes of  many  states  and  the  ensuing  litigation  in  the  federal  courts 
wherein  said  statutes  have  been  held  void  as  being  in  conflict 
with  the  all-powerful  "commerce  clause."  The  Supreme  Court 
of  the  United  States  has  thus  maintained  complete  free  trade 
between  the  states  of  the  Union,  which  the  several  states,  follow- 
ing the  innate  tendency  to  resort  to  "protection,"  have  sought  to 
impair  by  taxes  of  various  kinds  and  forms,  such  as  license  taxes 
on  peddlers  of  goods,  "which  are  not  the  growth,  product,  or  man- 
ufacture" of  the  state  so  licensing ;  prohibitive  fees  or  regulations 
under  color  of  food  inspection  laws  ;  taxes  on  goods  imported  in 
bulk  from  other  states,  and  levied  before  such  goods  were  mingled 
with  the  general  mass  of  property  in  the  taxing  state.  Taxes  on 
gross  receipts  growing  out  of  interstate  commerce,  and  taxes  by 
a  state  on  the  foreign-held  bonds  and  obligations  issued  by  her 
home  corporations,  have  been  held  unconstitutional  under  this 
clause.  See  p.  311,  below.  Many  other  statutes  seeking  to  im- 
pose taxes  meddling  with  interstate  trade  have  been  held  uncon- 
stitutional. The  late  Justice  Miller  of  the  federal  supreme  court, 
says  in  his  Lectures  on  the  Constitution  (New  York  and  Albany, 
1891),  pp.  80-8 1  :  "Many  cases  have  come  before  the  supreme 
court  of  the  United  States  involving  this  question,  when  state  laws 
have  been  held  to  be  invalid  because  in  conflict  with  the  constitu- 
tional power  of  Congress  to  alone  reTnlate  commerce  of  that  na- 
ture. Notwithstanding  for  nearly  one  hundred  years  we  have 
had  in  the  federal  Constitution  the  declaration  that  Congress  shall 
have  power  to  regulate  commerce  among  the  several  states,  there 
are  at  this  hour  upon  the  statute  books  of  almost  every  state  laws 
violating  that  provision  ;  and  there  is  no  doubt  that  if  that  clause 
were  removed  to-morrov/,  this  Union  would  fall  to  pieces,  simply 


HERTIG     ON     TAXATION.  293 

by  reason  of  the  struggles  of  each  state  to  make  the  property 
owned  in  other  states  pay  its  expenses."] 

4.  "No  state  shall  *  *  *  deny  to  any  person  within  its 
jurisdiction  the  equal  protection  of  the  laws." — Id.,  Fourteenth 
Amendment.  [This  portion  of  the  much  cited  amendment  is  the 
bulwark  imposed  by  the  federal  Constitution  against  "class  legis- 
lation"— a  very  ineffective  bulwark,  indeed,  against  class  legisla- 
tion of  a  certain  kind.  The  practical  construction  given  to  the 
bulwark  by  the  federal  supreme  court  is  that  so  long  as  classifica- 
tion is  not  capricious  nor  arbitrary,  so  long  as  classification  shows 
some  semblance  of  a  statesman-like  reason  for  making  it, — so 
long  and  so  far  may  states  make  as  many  classes  and  class  laws 
as  they  choose,  subject  only  to  the  limitation  that  each  member  of 
any  class  so  created  must  be  treated  substantially  as  his  fellow 
members  in  the  same  class, are  treated.  Thus  the  "equal  protection 
of  the  laws"  does  not  apply  to  citizen  and  citizen  as  such,  but  to 
class  member  and  like  class  member  as  such.  No  doubt,  to  im- 
agine an  extreme  case,  if  some  future  constitution  of  Minnesota 
were  to  copy  from  the  Ohio  constitution  of  1802  the  poll-tax 
clause  of  that  instrument,  perpetuated  also  in  Ohio's  present  con- 
stitution,— "the  levying  of  taxes  by  the  poll  is  grievous  and  op- 
pressive ;  therefore  the  legislature  shall  never  levy  a  poll  tax  for 
county  or  state  purposes," — but  were  to  add  the  proviso,  "But 
nothing  herein  contained  shall  be  construed  to  prevent  the  legis- 
ture  from  levying  a  poll  tax  of  $1.00  per  annum  on  each  male 
inhabitant  of  St.  Louis  and  Fillmore  counties,  of  the  age  of  21 
years  and  upwards,  to  be  levied  and  collected  as  other  taxes  shall 
1)e,  and  to  be  remitted  to  the  state  treasurer  for  state  purposes 
when  and  as  other  dues  shall  be  remitted," — no  doubt  such  carv- 
ing out  of  a  class  would  be  void  as  in  contravention  of  the  Four- 
teenth Amendment,  if  for  no  other  reason.  It  is  easy  to  imagine 
such  capricious  and  arbitrary  creation  of  classes  as  transcend  the 
limit,  but  not  quite  so  easy  to  defend  some  of  the  class  legislation 
which  has  been  held  not  to  transcend  it.  But  the  general  discus- 
sion of  this  clause  is  more  pertinent  to  my  work  on  the  Constitu- 
lion  of  the  United  States,  where  it  will  be  treated  in  full  detail.] 

Pursuing  here  the  further  consideration  of  this  clause  of  the 
Fourteenth  Amendment  in  its  direct  bearing  on  the  taxing  powers 
of  the  states,  I  add  that  revenue  clauses  in  state  constitutions  are 
sometimes  expressly  framed  to  fit  the  construction  given  to  trie 
Fourteenth  Amendment  by  the  supreme  court  of  the  United 
States.  Such,  for  instance,  is  a  well-known  and  much  discussed 
clause  of  the  Pennsylvania  constitution  of  1873, — "All  taxes  shall 
be  uniform  upon  the  same  class  of  subjects  within  the  territorial 
limits  of  the  authority  levying  the  taxes."  This  was  copied  into 


294  HERTIG     ON     TAXATION. 

the  constitution  of  Colorado,  adopted  in  1876,  also  into  those  of 
some  other  states,  and  is  found  also  in  the  amendments  proposed 
last  winter  by  the  Minnesota  tax  commission.  It  was  held  in 
Williamsport  v.  Wcnncr,  172  Pa.  State  Reps.  173,  that  the  city  of 
W.,  being  of  the  class  authorized  by  the  Pa.  legislature  "to  levy 
and  collect  for  general  revenue  purposes  a  license  tax  not  ex- 
ceeding one  hundred  dollars  each  annually  on  all  auctioneers,  con- 
tractors, *  *  *  merchandise  venders,"  and  some  forty 
other  kinds  of  persons — and  said  city  having  pursuant  to  that 
authority  enumerated  "merchants  of  all  kinds,"  and  classified  them 
for  the  purposes  of  determining  the  amount  of  such  tax  accord- 
ing to  the  gross  sum  of  their  annual  sales,  and  having  fixed  the 
amount  of  their  respective  license  taxes,  in  fact,  though  not  in 
name,  at  $1.00  on  the  thousand  of  their  respective  annual  sales, — 
had  constitutionally  exercised  the  power  so  delegated,  though  the 
city  had  used  such  multiples,  not  with  close  mathematical  accu- 
racy, but  on  the  maximum  sales  within  each  class.  Thus  the  city 
ordained  that  those  whose- sales  did  not  exceed  $1,000  "shall  con- 
stitute the  first  class  and  shall  pay  one  dollar;"  that  those  having 
sales  over  $1,000  and  not  exceeding  $5,000,  "shall  constitute  the 
second  cla^s  and  shall  pay  five  dollars,"  and  so  on  upwards 
through  many  classes  so  created.  It  is  plain,  therefore,  that  the 
Pennsylvania  court  thought  it  sufficiently  "uniform"  under  the1 
constitution  to  make  the  merchant,  having  sales  of  only  $1,100 
per  annum,  pay  $5.00  license  tax,  while  his  luckier  brother  in  the 
same  class,  with  annual  sales  just  reaching  $5  ooo.oo,  paid  no 
more.  "The  power  of  the  legislature,"  said  the  court  in  this  case, 
"to  delegate  to  a  municipality  its  power  to  tax  and  its  power  to 
classify  is  not  disputed  by  the  counsel,  but  it  is  contended  that  no 
such  power  is  \in  technical  completeness}  delegated  by  the  act  of 
1889." 

So  also  the  same  court  held,  in  Commonwealth  v.  Clark,  195 
Pa.  St.  634,  that  while  exempting  a  part  of  a  "class  doing  an  an- 
nual business  of  less  than  $i-,ooo,  and  imposing  a  tax  upon  others 
•belonging  to  the  same  class" — was  such  "class  legislation"  that 
that  part  of  the  ordinance  before  it  "must  fall,"  yet  that  the  city 
of  Titusville  could  constitutionally  make  valid  classes  of  whole- 
salers and  retailers,  and  levy,  not  under  its  police  powers,  but  as  a 
technical  tax  proper,  an  annual  tax  of  $100.00  on  class  one  of 
retailers,  consisting  of  retail  merchants  with  annual  business  each 
of  over  $60,000,  and  drop  to  just  $60.00  on  class  one  of  whole- 
salers, consisting  of  wholesale  merchants  with  annual  business  of 
over  $100,000;  could  levy  an  $80.00  tax  on  class  two  of  retailers, 
business  $50,000  to- $60,000  per  year,  while  levying  only  a  $50.00 


HERTIG    ON    TAXATION.  295 

tax  on  class  two  of  wholesalers,  business  $60,000  to  $100,000  per 
annum,  etc.  Still  another  and  later  Pennsylvania  case  (Knisely  v. 
Cotter  el,  196  Pa.  St.  614)  approves  the  spirit  of  the  two  cases 
already  cited,  and  while  holding  that  the.  act  of  May  2,  1889, 
under  which  the  cities  acted,  does  not  in  legal  effect  make  the 
tax  which  it  authorizes  "a  tax  upon  property,  but  upon  the  busi- 
ness of  vending  merchandise"  (syllabus),  by  which  saving  dis- 
tinction, it  could  be  upheld,  even  if  thought  unconstitutional  from 
the  standpoint  of  its  seeking  to  impose  "a  tax  upon  property," — 
further  holds  that  "even  as  a  tax  on  property  it  is  not  unconstitu- 
tional for  want  of  uniformity."  And  the  Pennsylvania  court  cites, 
as  fully  indorsing  its  views,  Bell's  Gap  R.  R.  Co.  v.  Penn.  134 
U.  S.  232,  to  the  effect  that  state  systems  of  taxation,  "so  long  as 
they  proceed  within  reasonable  limits  and  general  usage,  are  with- 
in the  discretion  of  the  state  legislature,  or  the  people  of  the  state 
in  framing  their  constitution ;"  and  that  they  are  not  in  violation 
of  the  provision  in  the  Fourteenth  Amendment  that  "no  state  shall 
deny  to  any  person  within  its  jurisdiction  the  equal  protection  of 
the  laws."  This  provision  "was  not  intended  to  prevent  a  state 
from  adjusting  its  system  of  taxation  in  all  proper  and  reasonable 
ways.  It  may,  if  it  chooses,  exempt  certain  classes  of  property 
from  any  taxation  at  all,  such  as  churches,  libraries  and  the  prop- 
erty of  charitable  institutions.  It  may  impose  different  specific 
taxes  upon  different  trades  and  professions,  and  may  vary  the 
rates  of  excise  upon  various  products ;  it  may  tax  real  estate  and 
personal  property  in  a  different  manner ;  it  may  tax  visible  prop- 
erty only,  and  not  tax  securities  for  payment  of  money ;  it  may 
allow  deductions  for  indebtedness,  or  not  allow  them."  The  last 
preceding  quotation,  also  from  the  Bell's  Gap  R.  R.  case,  last 
above  cited,  must  be  understood  as  affirming  the  states  to  have  the 
powers  mentioned,  if  their  legislatures  are  not  restrained  from 
their  exercise  by  the  state  constitutions.  S.  F.  Miller,  late  one 
of  the  justices  of  the  United  States  supreme  court,  expresses  the 
same  principle  in  his  lectures  on  the  Constitution  of  the  United 
States,  pp.  668-9 :  "^  state  law  for  the  valuation  of  property 
and  the  assessment  of  taxes  thereon,  which  provides  for  the  classi- 
fication of  property,  subject  to  its  provisions,  into  different  classes, 
which  makes  for  one  class  one  set  of  provisions  as  to  modes  and 
methods  of  ascertaining  the  value,  and  as  to  right  of  appeal,  and 
different  provisions  for  another  class  as  to  these  subjects,  but 
which  provides  for  the  impartial  application  of  the  same  means 
and  methods  to  all  constituents  of  each  class,  so  that  the  law  shall 
operate  equally  and  uniformly  on  all  persons  in  similar  circum- 
stances, denies  to  no  person  affected  by  it  'equal  protection  of  the 
laws'  within  the  meaning  of  the  Fourteenth  Ame"dni<  nt  Jo  the 


296  HERTIG    ON    TAXATION. 

Constitution   of  the  United   States."     See,   under  No.  6  below, 
important  inheritance  tax  case  cited. 

5.  "The  citizens  of  each  state  shall  be  entitled  to  all  privi- 
leges and  immunities  of  citizens  in  the  several  states." — Id.  Art. 
IV.,  Sec.  2.  [This  clause  of  the  Federal  Constitution  is  not  so 
important  in  its  bearing  on  the  question  of  taxation  rjy  the 
states  as  most  of  the  others  above  quoted.  Its  construction, 
as  made  by  the  federal  courts,  is  favorable  to  the  state  taxing 
powers.  Taxation,  ordinarily  speaking,  follows  property  and  not 
citizenship.  Under  like  property  conditions  the  citizen  at  home 
and  his  neighbor  from  another  state,  unless  the  latter  is  a  mere 
bird  of  passage,  are  treated  alike  from  the  taxing  standpoint. 
The  tax-dodger  is  as  likely  to  claim  and  profit  by  a  sham  resi- 
dence in  some  particular  locality  within  his  own  state,  as  to 
claim  and  profit  by  a  sham  residence  outside  his  own  state. 
One  legal  proposition  enunciated  by  the  supreme  court  of  the 
United  States  with  reference  to  this  clause  specially  favors  taxa- 
tion by  the  states.  A  corporation  is  held  to  be  a  citizen  of  the 
state  where  it  is  incorporated  for  the  purpose  of  defining  whethei 
the  federal  courts  have  jurisdiction  where  such  corporation  is 
one  of  the  parties;  but  a  state  may  specially  tax  foreign  corpora- 
tions; they  are  not  "citizens"  in  the  sense  which  that  word  has 
in  the  first  line  of  the  clause  under  discussion. — Paul  v.  Virginia, 
8  Wall.  168.  In  saying  that  a  state  may  specially  tax  foreign 
corporations  and  discriminate  against  them  in  favor  of  her  home 
corporations,"  the  word  "tax"  is  to  be  understood  in  general  as 
having  reference  to  a  sum  imposed  on  such  foreign  corporation 
as  a  payment  to  be  made  for  the  privilege  of  .doing  business  in 
such  state.  Nor  does  the  imposition  of  such  payment  infringe 
upon  the  commerce  clause  of  the  federal  constitution  (quoted 
above  as  No.  3)  unless  such  corporation  is  strictly  engaged  in 
carrying  on  foreign  or  interstate  commerce,  or  employed  by 
the  government  of  the  United  States. — Pembina,  etc.,  Milling 
Co.  v.  Penna.,  125  U.  S.  181.  Nor  in  such  case  is  such  corpora- 
tion denied  "the  equal  protection  of  the  laws"  under  the  Four- 
teenth Amendment,  for  it  has  no  right  to  claim  such  protection 
except  "on  condition  that  it  pays  the  required  license  tax."  Id. 
The  "immunity  clause  (quoted  above  as  No.  5)  does,  however, 
inhibit  to  some  extent  the  taxing  power  of  the  states:  they  must 
not  impose  a  discriminating  tax  upon  non-resident  traders. — 
Ward  v.  Maryland,  79  U.  S.  418.  In  this  case  the  Maryland 
statute  required  Ward,  as  a  non-resident  trader,  to  take  out  a 
license  running  one  year  and  pay  therefor  $300.00,  while  the 
license  for  the  same  time  required  to  be  paid  by  resident  traders 


HERTIG    ON    TAXATION.  297 

was  in  the  lowest  class  only  $12.00  and  in  no  case  higher  than 
$150.00.] 

6.  "No  state  shall  *  *  *  deprive  any  person  of  life, 
liberty  or  property  without  due  process  of  law." — Fourteenth 
Amendment,  Sec.  I.  [This  clause  of  the  Constitution  of  the 
United  States  stands  in  close  physical  connection  with  No.  4 
above  quoted.  The  two,  then,  are  naturally  cited  together  and 
often  invoked  together  as  having  been  violated  'by  the  constitu- 
tion or  statutes  of  some  state.  I  have  separated  No.  4  from  No. 
6,  because  the  latter,  in  so  far  as  it  affects  the  taxing  power  of 
the  state,  affects  the  procedure,  or  machinery-  for  assessing  and 
collecting  taxes,  rather  than  the  kind  and  quality,  or  the  rate  and 
subjects  of  taxation.  If,  for  instance,  a  tax  is  not  in  contraven- 
tion of  some  other  provision  of  the  Federal  Constitution,  and 
if  it  is  not  sought  to  be  assessed  and  collected  in  such  a  way  as  to 
reach  the  tax  payers'  property  without  giving  to  him  actual  or 
constructive  notice  of  the  proceedings  at  each  successive  stage 
thereof,  and  without  giving  him  a  reasonable  opportunity  to  ap- 
pear and  contest  the  same, — then  such  tax  and  the  proceedings 
under  it  cannot  be  impeached,  under  the  Federal  Constitution, 
as  depriving  a  person  of  property  "without  due  process  of  law." 
However  unfair  and  foolish  a  tax  may  be,  always  provided  it  be 
able  to  slip  past  other  restraints,  it  takes  the  property  of  tin 
citizen  "with  due  process  of  law,"  if  he  has  but  had  his  notice  of, 
and  his  chance  to  contest,  the  legality  of  the  various  proceedings 
embraced  in  assessment,  levy  and  collection.  Whether  in  such 
case  with  such  chance  he  locally  puts  his  own  shoulder  to  the 
wheel  or  not,  he  shall  bawl  to  the  federal  Hercules  vainly  for 
help.  Nor  is  individual  notice  of  the  sitting  of  a  board  of  equal- 
ization necessary;  it  is  enough  that  the  time  of  its  sitting  is  fixed 
by  law,  when  any  aggrieved  individual  can  attend  if  he  sees  fit. 
The  United  States  supreme  court  said  in  State  Railroad  Ta.\- 
Cases,  92  U.  S.  610:  "This  board  has  its  time  of  sitting  fixed 
by  law.  Its  sessions  are  not  secret.  No  obstruction  exists  to 
the  appearance  of  any  one  before  it  to  assert  a  right,  or  redress 
a  wrong;  and,  in  the  business  of  assessing  taxes,  this  is  all  that 
can  be  reasonably  asked.''] 

One  of  the  most  important  of  recent  cases  involved  the  two 
clauses  of  the  Fourteenth  Amendment  quoted  above  by  me  sep- 
arately as  Nos.  4  and  6,  in  connection  with  an  inheritance  tax. — 
Magoun  v.  Illinois  Trust  &  Savings  Bank,  170  U.  S.  283.  In 
this  case,  a  law  of  Illinois  had  imposed  a  legacy  and  inheritance 
tax, — a  tax  of  i  per  cent  on  each  inheritance  or  legacy  going  to 
near  relations,  but  only  on  the  excess  above  $20,000  of  such 
inheritance;  a  tax  of  2  per  cent  on  each  legacy  or  inheritance  go- 


298  HERTIG    ON    TAXATION. 

ing  to  somewhat  more  remote  relatives,  on  the  excess  of  such 
legacy  above  $2,000;  and  finally  on  all  estates  of  decedents  go- 
ing to  persons  more  remotely  of  kin  or  not  of  kin  at  all  a  tax 
on  the  whole  estate  so  distributed  without  any  exemption, — on 
estates  of  $10,000  or  less  3  per  cent;  on  estates  of  over  $10,000 
and  not  exceeding  $20,000,  4  per  cent;  on  estates  over  $20,000 
and  not  exceeding  $50,000,  5  per  cent,  and  on  larger  estates  6 
per  cent;  provided  that  no  estate  of  less  than  $500  should  be 
subject  to  any  tax.  This  progression  of  rates  was  assailed  in 
the  courts  of  Illinois  as  being  in  violation  of  the  constitution  of 
that  state  requiring  equal  and  uniform  taxation.  Illinois  hoi  cling- 
that  the  progressive  feature  did  not  violate  her  constitution, 
the  case  went  to  the  supreme  court  of  the  United  States  upon  the 
contention  that  the  establishment  of  a  progressive  rate  was  a 
denial  both  of  due  process  of  law  and  of  the  equal  protection  of 
the  laws,  under  the  Fourteenth  Amendment. — The  federal  court, 
however,  denied  the  contention,  and  held  the  Illinois  inheritance 
tax  law  to  be  constitutional. 

7.  Congress  shall  have  power  to  lay  and  collect  taxes,  du- 
ties, imposts,  and  excises,  to  pay  the  debts  and  provide  for  the 
common  defense  and  general  welfare  of  the  United  States;  but 
all  duties,  imposts  and  excises  shall  be  uniform  throughout  the 
United  States."  Art.  L,  Sec.  8.  [This  clause  which  measures 
the  vasf  taxing  powers  of  congress  does  not  in  itself  limit  the 
taxing  powers  of  the  states.  Except  as  the  states  are  expressly 
prohibited  in  the  Federal  Constitution  or  prohibited  by 
construction  given  to  that  instrument,  from  levying  and 
collecting  taxes  of  a  certain  kind  such  as  "imposts  or 
duties  on  imports  or  exports,"  "duties  of  tonnage,"  taxes 
on  inter-state  commerce  and  the  like, — the  states  may  tax  what- 
ever congress  may  tax,  though  congress,  on  account  of  the  spe- 
cial limitation  of  its  powers  cannot  conversely  tax  whatever  the 
states  may  tax.  A  familiar  example  of  the  exercise  of  this  con- 
current and  unlimited  right  of  taxation  belonging  both  to  the 
federal  and  to  the  state  governments,  is  afforded  by  the  liquor 
traffic.  The  liquor  seller  pays  a  license  tax  to  both  governments, 
and  the  nation  and  the  state  may  make  such  tax  as  high  as  each 
shall  choose.  It  is,  however,  a  doctrine  derived  wholly  from  gen- 
eral principles,  which  the  federal  and  most  state  constitutions 
pass  over  in  silence  that  neither  the  national  nor  any  state  gov- 
ernment has  the  right  to  tax  the  instrumentalities  of  the  other. 
"The  power  to  tax  involves  the  power  to  destroy,"  said  Chief 
Justice  Marshall  in  the  celebrated  case  of  McCufloch  v.  Mary- 
land, 4  Wheat.  316.  Hence  if  either  government  could  lawfully 
tax  the  instrumentalities  of  the  other,  such  doctrine  would  be 


HERTIG     ON     TAXATION.  299 

equivalent  to  proclaiming  that  the  seeds  of  speedy  decay  had 
been  planted  in  the  very  foundation  and  structure  of  our  system 
of  government.  A  particular  illustration  will  suffice.  It  is  no 
novelty,  in  taxation  for  governments  to  tax  writs,  pleadings, 
judgments, — all  the  machinery  of  legal  proceedings,  nay  even 
pardons.  The  tax  on  pardons  in  England  was  formerly  four 
pounds  sterlng!  Less  than  a  hundred  years  ago  on  account  of 
taxes  on  legal  papers,  "the  expense  of  carrying  through  a  common 
action"  [at  law]  could  not  "be  less  than  about  24  pounds  at  the 
lowest  rate  on  the  plaintiff's  side  alone." — BENTHAM'S  Works 
(Bowring's  ed.)  Vol.  II.,  p.  575,  in  note.  In  the  same  volume 
(p.  593)  in  an  Addition  fry  a  Learned  Friend,  it  is  said  that  the 
defendant  in  Roc  v.  Gudgeon,  a  chancery  case,  "submitted  that 
he  ought  not  to  be  compelled  to  set  out  certain  accounts  which 
had  been  required  by  the  bill,' as  the  expense  of  taking  what  is 
called  an  office  copy  of  them, — a  necessary  preliminary  to  any 
further  proceeding  on  the  part  of  the  plaintiff  in  the  case  would 
amount  to  the  sum  of  29,000  pounds ;  an  expense  almost  wholly 
arising  from  the  stamps  on  the  paper,  on  which  the  office  copy 
of  the  answer  is  compulsorily  made!"  (Held  in  said  case"  not 
necessary  to  set  out  said  accounts,  but  the  reason  for  so  hold- 
ing not  stated.)  It  was  doubtless  owing  to  Bentham's  unan- 
swerable protests  against  such  taxes  that  in  England,  by  the 
statute  of  5  George  IV.,  Ch.  41,  they  were  in  great  measure  re- 
pealed, and  have  since  then  become  wholly  extinct.  In  France, 
however,  the  stamp  duties  on  all  manner  of  legal  and  quasi-legal 
documents,  certificates,  process  and  the  like — inaugurated  by 
Mazarin,  then  for  a  brief  time  abolished,  but  reinstated  by  Col- 
bert— have  survived  the  vicissitudes  of  revolutions  and  govern- 
ments and  still  yield  a  handsome  sum  to  the  French  revenues.] 

Now  the  necessary  papers  in  legal  process  and  in  the  admin- 
istrative department  of  nation  and  state  are  instrumentalities  of 
government.  If  nation  or  state  could  tax  these  and  other  instru- 
mentalities of  each  other,  the  immediate  peril  in  it  and  the 
speedy  ultimate  ruin,  if  the  right  to  so  tax  and  the  fact  of  so  tax- 
ing were  established  and  continued — would  be  equally  apparent. 
"If  the  states,"  said  Chief  Justice  Marshall  in  McCulloch  v. 
Maryland,  above  cited,  "may  tax  one  instrument  employed  by 
the  government  in  the  execution  of  its  powers,  they  may  tax 
any  and  every  other  instrument.  They  may  tax  the  mail  ;they 
may  tax  the  mint ;  they  may  tax  pat ent  rights ;  they  may  tax  the 
papers  of  the  custom  house;  they  may  tax  judicial  process; 
they  may  tax  all  the  means  employed  by  the  government  to  an 
excess  which  \vould  defeat  all  the  ends  of  government.  This  was 
not  intended  by  the  American  people." 


300  HERTIG     ON     TAXATION. 

It  is  an  equally  well  settled  principle  of  American*-  juris- 
prudence that  the  nation  can  no  more  tax  the  instrumentalities 
of  the  state  governments  than  the  latter  can  tax  those  of  the  na- 
tion. 

When  all  is  said,  the  limitations  relating  to  taxation  which 
the  Constitution  imposes  upon  congress  are  of  form  rather  than 
of  substance.  The  better  construction  given  to  clause  Xo.  7 
above  quoted  is  that  congress  is  authorized  "to  levy  and  collect 
taxes,  duties,"  etc.,  only  for  the  purpose  expressed, — "to  pay  the 
debts  and  provide  for  the  common  defense  and  general  welfare 
of  the  United  States."  This  is  a  public  purpose;  but  except  in 
so  far  as  the  president  may  kill  an  appropriation  bill  with  n 
an  appropriation  by  congress  "goes"  whether  i.s  purpose  is  pub- 
lic or  otherwise.  No  tribunal  other  than  congress  can  pass  on 
that  question,  and  there  is  no  way  to  recover  government  money 
paid  out  on  a  foolish  or  corrupt  appropriation.  The  limitation 
expressed  in  the  words  "uniform  throughout  the  United  States" 
is  very  vital  in  the  sense,  that,  except  as  narrowed  under  the 
"colonial  policy"  of  the  nation  (as  in  the  special  tariff  for  Porto 
Rico,  sustained'  in  Downcs  v.  Bidr^cll,  18:  U.  S.) — it  protects- the 
people  against  taxes  which  discriminate  geographically,  or  be- 
tween different  localities  in  the  United  States.  If  "uniform" 
were  construed  in  the  strict  sense  of  the  word,  then  congress 
would  be  confined,  both  as  to  duties  and  internal  revenue  taxes. 
to  an  ad  valorem  rate,  the  same  at  any  given  time  on  all  the  sub- 
jects of  taxation.  With  this  strict  meaning  of  'uniform,"  whis- 
key could  not  be  made  to  pay  a  tax  equal  in  amount  to  four  or 
five  times  the  average  cost  of  producing  it,  while  making  tobac- 
co and  other  articles  pay  a  tax  equal  to  only  a  fraction  of  the 
cost  of  their  production.  Not  the  strict  but  the  common-sense 
meaning  of  "uniform"  has  been  given  to  the  word  as  used  in  the 
Constitution  ;  a  tax,  then,  is  "uniform"  when  it  is  so  geographically, 
that  is,  of  the  same  rate  on  the  same  thing  throughout  the  Unit- 
ed States,  though  each  different  thing  may  be  taxed  at  a  different 
rate,  subject  to  the  like  geographical  uniformity.  None  of  those 
limitations  interfere  with  the  option  of  congress  when  to  tax  and 
how  much  to  tax.  There  is  a  clause  in  Sec.  9,  of  Article  I.  of 
the  constitution  that  imposes  on  congress  a  somewhat  ambigu- 
ous limitation, — "No  capitation  or  other  direct  tax  shall  be  laid, 
unless  in  proportion  to  the  census  or  enumeration  hereinbefore 
directed  to  be  taken."  The  failure  of  congress  to  understand 
this  clause  as  the  federal  supreme  court  afterwards  understood 
it — by  a  divided  court,  after  a  reargument  which  changed  the 
mind  of  one  of  the  judges — caused  the  federal  income  tax  law  of 
[894  to  be  held  unconstitutional. 


HERTIG    ON    TAXATION.  301 

lUit  this,  like  the  other  limitations,  can  hardly  be  considered 
as  a  substantial  check  on  the  power  of  congress  to  raise  revenue 
by  taxation.  Congress,  it  must  be  remembered,  has  at  its  com- 
mand not  only  the  immense  direct  powers  for  taxation  granted 
by  the  Constitution,  but  indirectly  all  powers  of  the  state  gov- 
ernments for  the  like  purpose.  The  instance  in  support  of  this 
proposition  furnished  by  the  financial  history  of  the  Civil  Wai 
is  worth  remembering.  In  1861,  a  "direct  tax"  aggregating  $2:, 
000,000  was  laid  upon  the  states  in  proportion  to  their  population 
as  evidenced  by  the  census  of  1860.  The  government  at  Washington 
having  taken  the  theoretical  stand  that  the  seceding  states  were 
still  in  the  Union,  could  not  do  otherwise  than  levy  upon  them 
their  pro  rata  share  of  the  $20,000,000  tax.  This  tax  was  not  in 
form  or  fact  a  levy  and  collection  through  the  federal  machinery, 
but  a  requisition  on  the  respective  states.  The  northern  states  paid 
their  pro  rata  amount  of  the  tax,  but  raised  the  money  through 
their  own  fiscal  and  taxing  machinery — sufficient  evidence  in 
support  of  my  proposition  that  the  federal  government,  in  ad- 
dition to  its  own  special  tax  machinery,  indirectly  commands 
for  raising  further  revenue  all  the  taxing  machinery  of  the 
states. 

The  foregoing  quoted  clauses  of  the  Federal  Constitution, 
numbered  from  i  to  7  inclusive,  show  in  outline  with  the  com- 
ment appended  to  them  the  inter-relation  of  the  federal  and 
state  systems  of  taxation,  and  particularly  those  restraining  con- 
siderations which  must  be  constantly  borne  in  mind  by  whoever 
would  frame  or  amend  a  state  constitution,  or  frame  or  amend 
a  tax  code  for  any  state  in  the  Union,  and  by  whoever  would 
give  intelligent  consideration  to  work  of  that  kind  done  or  to  be. 
done.  The  more  intricate  and  detailed  varieties  of  federal  and 
state  taxation  will  be  brought  under  full  control  and  regulation 
by  the  new  jurisprudence,  of  which  more  in  other  works. 

In  the  current  practice  of  law  as  applied  to  tax  matters,  and 
to  many  other  matters  as  well,  the  Federal  Constitution  and  its 
courts  always  remain  as  the  forlorn  or  buoyant  hope  of  lawyers 
whose  clients  are  disappointed  in  the  state  courts.  An  instance 
lies  ready  to  hand. 

The  so  called  "unit  rule"  for  taxing  public  service  corpora- 
tions, that  is,  loosely  stated,  taxation  on  the  sum  of  their  stocks- 
and  bonds,  more  accurately  stated  in  Sec.  83  of  the  tax  commis- 
sion's code  in  prescribing  the  mode  for  valuing  franchises  (quot- 
ed above,  and  applied  with  approximate  accuracy  by  Calderwood 
in  his  argument,  p.  272.  above) — has  been  sanctioned  by  the 
supreme  court  of  the  United  States  (Railroad  Tax  Cases,  92  U. 
S.  575),  as  not  in  contravention  of  the  Federal  Constitution.  In- 


302  HERTIG    ON    TAXATION. 

deed  the  court  said:  "The  validity  of  the  statute  is  not  seriously 
questioned  here  on  the  ground  of  any  conflict  with  the  Consti- 
tution of  the  United  States."  P.  617. 

The  far-reaching  and  radical  consequences,  however,  of  a 
bona  fide  and  continued  application  of  the  unit  rule,  are  so  appar- 
ent, that  the  very  contemplation  of  them  has  sufficed  to  paralyze 
the  working  of  the  rule  itself.  There,  for  instance,  is  Illinois, 
from  which  state  came  the  group  of  pioneer  cases,  in  which  the 
rule  and  the  statute  embodying  it  were  declared  constitutional  in 
92  U.  S.  575,  just  cited.  Yet  in  Illinois  the  rule  and  the  embody- 
ing statute  remained  a  dead  letter  officially,  until  very  recently, 
when  the  women  of  the  Teachers'  Federation  of  Chicago,  with 
woman's  zeal  and  her  faith  in  the  transfusion  of  blood  into  ghosts, 
brought  an  action  of  mandamus  against  the  members  of  the  Illi- 
nois State  Board  of  Equalization,  asking  the  court  to  order  the 
board  to  reassemble  and  to  assess  in  accordance  with  such  rule 
and  the  letter  of  the  law.  The  court  so  ordered.  Great  Flutter. 
Appeal  to  the  Illinois  supreme  court.  Elaborate  opinion  by  that 
tribunal  affirming  on  all  points  the  judgment  of  the  lower  court. 
Reluctant  Board  of  Equalization  does  now  reassemble  and  actu- 
ally assess.  Great  rejoicing  for  that  now  the  ship  of  Illinois  state, 
and  particularly  her  magnificent  tender,  Chicago,  will  float  with 
even  keel  on  deep  seas  of  revenue.  Why  the  Illinois  corporations 
should  so  deeply  mourn  and  stubbornly  contest  is  not  at  first 
glance  apparent,  when  one  notes  that  in  Illinois  since  an  extra 
session  of  her  legislature  held  in  1898,  while  they  try  to  list  all 
kinds  of  property  at  its  "full  and  true  value,"  they  take  only  20 
per  cent  of  such  value  and  put  that  20  per  cent  in  an  appropriate 
column  of  the  assessment  book  as  the  taxable  value  of  the  prop- 
erty. But  low  assessments,  involving  high  rates  on  the  assessed 
value"  these  and  previous  immunity  from  high  taxes,  moved  the 
Illinois  corporations  to  resist.  They  had  exhausted  recourse  to 
the  courts  of  Illinois  and  found  that  recourse  fruitless.  Where 
now  could  they  go,  except  to  the  federal  courts,  to  the  sheltering 
arms  of  the  same  "Uncle  Sam"  who  had  previously  told  them  in 
the  Q2nd  volume  of  his  United  States  Reports  that  the  validity 
of  the  statute  was  not  seriously  questioned- on  account  of  any  sup- 
posed conflict  with  his  Constitution,  and  if  it  were  so  questioned, 
the  simple  answer  would  be.  no  conflict?  Here  is  a  newspaper 
epitome  of  the  first  result  of  fleeing  to  the  good  Uncle  for  shelter : 
"The  United  States  Court  in  Chicago  took  the  extraordinary  step 
of  setting  aside  the  unit  rule  assessment  of  local  corporations 
adopted  under  the  state  law,  and  substituting  an  assessment 
made  by  capitalizing  the  net  earnings.  Should  this  be  sustained 
by  the  supreme  court,  probably  there  would  be  an  end  cf  fran- 


HERTIG     ON     TAXATION. 


303 


chise  taxation   on   this  basis." — Minneapolis   Tribune,  April    13, 
1902.      [This  case  reviewed,  ch.  XIX,  below.] 

If  the  foregoing  considerations  in  this  chapter,  and  all  of 
them,  were  not  present  to  the  minds  of  the  legislators  and  others 
who  passed  judgment  on  the  proposed  amendments  drafted  by 
the  Minnesota  tax  commission,  and  discussed  last  winter,  such 
considerations  will  materially  aid  any  who  may  choose  to  recur 
to  the  subject  in  Minnesota,  or  who  may  bring  fresh  minds  to 
amending  constitutions  in  Minnesota  or  elsewhere  in  the  United 
States.  This,  then,  is  the  logical  place  to  set  forth  those*  amend- 
ments, as  well  as  those  different  ones  which  the  Minnesota  legis- 
lature did  adopt  in  lieu  of  them.  Article  IX  of  the  Minnesota 
constitution  contains,  as  it  stands,  17  sections.  By  adopting  the 
commission's  amendments,  this  article  would  have  still  had  17 
sections,  but  the  first  four  would  have  been  substituted  out  by 
the  like  number  of  the  commission's.  Here  follow  in  parallel  col- 
umns the  four  sections  of  said  article  and  the  four  sections  which 
the  commission  sought  to  substitute  for  them : 

LIKE    NUMBERED     SECTIONS    OF     THE 
COMMISSION. 

[The  reader  will  note  that  the 
words  in  brackets  in  the  left-hand 
column  mark  amendments  that 
have  actually  been  adopted  from 
time  to  time,  and  are  now  a  part 
of  the  sections  wherein  they 
stand  ;  while  the  bracketed  words 
in  this,  the  right  hand  column, 
are  my  comment.] 

"Sec.  i.  The  power  of  taxa- 
tion shall  never  be  surrendered  or 
suspended."  [This  proposed  sub- 
stitute for  Sec.  i  of  Art.  IX.  of 
the  actual  constitution  is  short  and 
sweet.  The  commission  judi- 
ciously observed  on  p.  53  of  their 
Report,  with  evident  reference  to 
this  clause:  "Public  interests 
would  undoubtedly  be  best  guard- 
ed under  a  constitution  which 
divests  a  legislature  of  the  power 
of  entering  into  a  contract  with 
respect  to  taxation.  The  United 
States  supreme  court  has  never 
rendered  a  more  unpopular  deci- 
sion than  when  it  held  that  a 
state  legislature  mav.  unless  re- 
stricted by  a  constitution,  contract 
away  the  sovereign  power  of  tax- 
afion.  That  decision  has  been  ad- 


SECS.     I,    2,    3,    4,    AS    THEY     STAND. 


Sec.  i.  All  taxes  to  be  raised 
in  this  state  shall  be  as  nearly 
equal  as  may  be,  and  all  property 
on  which  taxes  are  to  be  levied 
shall  have  a  cash  valuation  and 
be  equalized  and  uniform  through- 
out the  state ;  [provided,  that  the 
legislature  may,  by  general  law  or 
special  act,  authorize  municipal 
corporations  to  levy  assessments 
for  local  improvements  up- 
on the  property  fronting  upon 
such  improvements,  or  upon  the 
property  to  be  benefited  by  such 
improvements,  or  both,  without 
regard  to  a  cash  valuation,  and  in 
such  manner  as  the  legislature 
may  prescribe.]  [And,  provided, 
further,  that  for  the  purpose  of 
defraying  the  expenses  of  laying 
wntcr  pipes  and  supplying  any 


304 


HERTIG    ON    TAXATION. 


city  or  municipality  with  water, 
the  legislature  mav,  by  general 
or  special  law,  authorize  any  such 
city  or  municipality  having  a  pop- 
ulation of  five  thousand  (5.000) 
or  more,  to  levy  an  annual  tax 
or  assessment  upon  the  lineal 
foot  of  all  lands  fronting  on  any 
water  main  or  water  pipe  laid  by 
such  city  or  municipality  within 
corporate  limits  of  said  city,  for 
supplying  water  to  the  citizens 
thereof,  without  regard  to  the 
cash  value  of  sucn  property,  and 
to  empower  such  city  to  collect 
any  such  tax,  assessment  or  fines, 
or  penalties,  for  failure  to  pay 
the  same,  or  any  fine  or  penalty 
for  any  violation  of  the  rules  of 
such  city  or  municipality  in  re- 
gard to  the  use  of  water,  or  for 
any  water  rate  due  for  the  same.] 
[And,  provided  further,  that 
there  may  be  by  law  levied  and 
collected  a  tax  upon  all  inheri- 
tances, devises,  bequests  lega- 
cies, and  gifts  of  every  kind  and 
description,  above  a  fixed  and 
specified  sum,  of  any  and  all 
natural  persons  and  corporations. 
Such  a  tax  above  such  exempted 
sum  may  be  uniform,  or  it  may 
In*  -graded  or  progressive,  but 
shall  no!  exceed  a  maximum  tax 
of  five  per  cent.] 


Sec.  2.  The  legislature  shall 
provide  for  an  annual  tax  suffi- 
cient to  defray  the  estimated  or- 
dinary exnenses  of  the  state  for 
each  year ;  and  whenever  it  shall 
happen  that  such  ordinary  ex- 
penses of  the  state  for  any  year 
shall  exceed  the  income  of  ^  the 
state  for  such  vear,  the  legisla- 
ture shall  provide  for  levying  a 
tax  for  the  ensuing  year,  suffi- 
cient with  other  sources  of  in- 
come to  pay  the  deficiency  ^of  the 
preceding  year,  together  with  the 
estimated  expenses  01  such  ensu- 
ing year.  [But  no  law  levying 


hcred  to  in  so  many  cases  that 
it  is  not  now  reasonable  to  expect 
that  it  will  ever  be  overruled  by 
lh,-!t  court."  The  commission  here 
meant  the  celebrated  cag 
Dartmouth  College  v.  Woodward, 
holding  that  a  grant  is  an  exe- 
cuted contract,  and  as  such  can- 
rot  afterward  be  "impaired"  by 
any  state.  The  commission,  how- 
ever, failed  to  s.ate  that  the 
scope  of  the  decision  has  been 
much  limited  by  subsequent  deci- 
sions; and  the  commission  could 
not  have  been  expected  to  state 
that  the  new  jurisprudence  will 
not  find  it  a  titanic  task  to  ex- 
tract such  sting  as  may  still  re- 
main in  Dartmouth  College  v. 
Woodward.  Many  of-  the  states 
have  taken  the  precaution  to 
guard,  with  appropriate  constitu- 
tional plank,  against  any  effect 
of  said  decision  that  might  other- 
wise be  felt  in  subsequent  tax 
contracts.  Thus  Colorado  (con- 
stitution of  1876)  :  "The  power  to 
tax  corporations  and  corpor- 
ate property,  real  and  personal, 
shall  never  be  relinquished  or 
suspended."  Thus  California 
(constitution  of  1879)  :  "Ihe 
power  of  taxation  shall  never  be 
surrendered  or  suspended  by  any 
grant  or  contract  to  which  the 
state  shall  be  a  party."  The  Cali- 
f®rnia  plank  is  in  a  favorite  form 
and  prohibits  as  broadly  though 
not  so  concisely  as  the'  commis- 
sion plank.] 

"Sec.  2.  All  taxes  shall  be  uni- 
form upon  the  same  class  of  sub- 
jects within  the  territorial  limits 
of  the  authority  levying  the  taxes ; 
and  shall  be  levied  and  collected 
under  general  laws  for  public 
purposes."  [This  differs  from  a 
well-known  plank  in  the  Penn- 
sylvania constitution  of  1873,  only 
by  the  addition  of  the  words, 
"for  public  purposes ;"  which, 
though  "surplusage,"  do  no 
harm.  It  is  a  fundamental  doc- 
trine of  tax  law  that  a  tax  is  not 
a  valid  tax  unless  "for  public 
purposes."  Perhaps  the  commis- 


HERTIG    ON    TAXATION. 


305 


a  tax,  or  making  other  provi- 
sions for  the  payment  of  inter- 
est or  principal  of  the  bonds  de- 
nominated "Minnesota  State 
Railroad  Bonds,"  shall  take  effect 
or  be  in  force  until  such  law 
shall  have  been  submitted  to  a 
vote  of  the  people  of  the  state 
and  adopted  by  a  majority  of  the 
electors  of  the  state  voting  upon 
the  same.] 

Sec.  3.  Laws  shall  be  passed 
taxing  all  moneys,-  credits,  invest- 
ments in  bonds,  stocks,  joint  stock 
companies,  or  otherwise,  and  also 
all  real  and  personal  prooerty,  ac- 
cording to  its  true  value  in 
money;  but  public  burying 
grounds,  public  school  houses, 
public  hospitals,  academies,  col- 
leges, universities,  and  all  semi- 
naries of  learning,  all  churches, 
church  property  used  for  religious 
purposes,  and  houses  of  worship, 
institutions  of  purely  public  char- 
ity, public  property  used  exclu- 
sively for  any  public  purpose,  and 
personal  property  to  an  amount 
not  exceeding  in  value  two  hun- 
dred dollars  for  each  individual, 
shall,  by  general  laws,  be  exempt 
from  taxation. 


sion  thought  that  legislatures  are 
apt  to  forget  this.  See  pp.  293-5, 
above,  for  the  Pennsylvania  con- 
struction of  this  plank's  legal  ef- 
fect and  its  harmony  with  the 
Fourteenth  Amendment  to  -the 
federal  constitution.] 


"Sec.  3.  The  legislature  may  by 
general  laws  provide  for  the  ap- 
portionment to  counties,  of  the 
amount  of  revenue  to  be  raised 
therein  for  state  purposes,  and 
may  in  any  law  providing  for 
such  apportionment  authorize 
counties  to  select  the  subjects  up- 
on which  revenue  is  to  be  raised 
therein  for  state  or  county  pur- 
poses, and  to  apportion  such  rev- 
enue among  the  cities,  villages 
and  townships  of  the  county." 
[The  commission  offered  this  its 
local  option  plank  in  harmony 
with  the  view  expressed  in  its 
Report,  p.  55:  It  should  be  left 
to  a  large  extent  to  the  political 
subdivisions  of  the  state  to  de- 
termine for  themselves  the  ob- 
jects for  which  revenue  is  to  be 
raised  therein  and  the  subjects 
from  which  it  is  to  be  exacted." 
Of  this,  more  anon.] 

"Sec.  4.  The  legislature  may 
by  a  general  law  or  special  act 
— •  may  prescribe." 
[The  long  dash  indicates  omit- 
ted words  which  may  be  supplied 
from  the  first  proviso  in  Sec.  i  of 
Art.  IX.  as  it  stands.  The  com- 
mission, to  have  a  fourth  section 
in  place  of  the  actual  section  4, 
which  is  obsolete  by  disuse  and 
superfluous  by  original  sin — 
shifted  into  this  order  the  first 
proviso  in  Sec.  I,  that  relating  to 
"assessments  for  local  improve- 
ments."] 

The  commission  provided  also  for  the  repeal  of  sec.  17  of 
article  IX,  which  section  got  into  the  constitution  by  the  amend- 
ment route,  Nov.  3,  1896.  It  relates  to  the  taxation  of  sleeping 
car,  telegraph,  telephone  and  express  companies,  to  the  taxation 


Sec.  4.  Laws  shall  be  passed 
for  taxing  the  notes  and  bills  dis- 
counted or  purchased,  moneys 
loaned,  and  other  property,  ef- 
fects or  dues  of  every  description, 
of  all  banks  and  all  bankers,  so 
that  all  property  employed  in 
banking  shall  always  be  subject  to 
a  taxation  equal  to  that  imposed 
upon  the  property  of  individuals. 


306  (  HERTIG    ON    TAXATION. 

of  "domestic  insurance  companies  of  the  state  of  any  kind,"  to 
the  taxation  of  mining  properties,  boom  companies,  and  "of  all 
ship  builders  or  owners  doing  business  in  the  state  or  having  a 
port  therein." 

It  is  shabbily  and  ambiguously  drawn,  and  drags  itself  through 
its  wearisome  lines  with  a  shambling  helplessness  that  moves  at 
once  to  wonder  and  pity ;  but  it  is  not  without  advantage  to  the 
state ;  if  it  does  not  enlarge  the  horizon  of  the  constitution  by  in- 
telligent ascent  to  some  Mount  Pisgah  of  taxation,  it  at  least 
contrives  to  make  an  awkward  rent  in  the  sky.  Upon  the  proper- 
ties mentioned  it  authorizes  the  legislature  to  impose  "a  tax  as 
uniform  as  reasonably  may  be  with  the  taxes  imposed  upon  sim- 
ilar property  in  said  state,  or  upon  the  earnings  thereof  within 
this  state,  but  [said  tax]  may  be  graded  or  progressive,  or  both, 
and  in  providing  for  such  tax,  or  in  providing  for  ascertaining  the 
just  and  true  value  of  such  property,  it  shall  be  competent  for  the 
legislature,  in  either  or  all  of  such  cases,  to  impose  such  tax  upon 
any  or  all  property  thereof  within  this  state,  and  in  either  case  by 
taking  as  the  basis  of  such  imposition  the  proportionate  business, 
earnings,  mileage  or  quantity  of  production  or  property  now  or 
hereafter  existing  of  any  such  companies,  persons  or  owners, 
transacted  or  existing  in  this  state,  in  relation  to  the  entire  busi- 
ness, mileage  or  quantity  of  production  or  property  of  such  com- 
panies, persons  or  owners  as  aforesaid ;  or  in  such  other  manner, 
or  by  such  other  method,  as  the  legislature  may  determine."  Pro- 
viso that  "this  act  shall  not  apply  to  property  owned  by  railroads, 
their  lands  and  other  property ;"  proviso  for  distributing  the  taxes 
on  mining  property  "between  the  state  and  the  various  political 
subdivisions  thereof  wherein  the  same  is  situated  in  the  same  pro- 
portion as  the  proceeds  of  taxes  upon  real  property  are  distrib- 
uted ;  further  proviso  that  "nothing  in  this  act  contained  shall 
operate  to  authorize  the  assessment  or  taxation  of  land  or  ordinary 
business  blocks  or  property  owned  by  any  such  corporation,  per- 
son, firm  or  company,  except  in  the  manner  provided  by  the  ordi- 
nary methods  of  taxation."  Whatever  the  net  meanings  of  the 
cumbrous  authorizations  conferred  on  the  legislature  by  this  sec- 
tion 17,  they  would  not  be  of  any  use  under  the  flexible  amend- 
ments offered  by  the  commission.  That  body,  therefore,  rightly 
provided  for  the  repeal  of  said  section. 

The  struggle  over  the  commission's  amendments  in  the  leg- 
islature resolved  itself  in  substance  into  a  controversy  as  to  wheth- 
er an  "open-door"  constitution  is  better  than  a  "closed-door"  one. 
Open-door  or  "wide-open""  amendments — for  both  descriptions 
were  used  to  denote  the  same  thing — mean  amendments  giving  to 
the  legislature  far  greater  discretionary  power  than  is  left  at  the 


HERTIG    ON    TAXATION.  307 

disposal  of  that  body  by  the  constitution  as  it  is.  The  commission 
defended  itself  in  advance  (Report,  p.  53),  and  very  neatly,  with 
reference  to  giving  the  legislature  an  entirely  free  hand  as  regards 
exemptions  from  taxes.  "Treated-  as  an  original  proposition,  it 
may  well  be  questioned  whether  any  class  of  property,  save  that 
devoted  strictly  to  public  use,  should  be  exempt.  Abuses  barnacle 
themselves  to  the  exemption  of  every  other  class  of  property.  In 
some  instances  they  are  very  great  and  materially  increase  the 
burdens  borne  by  other  classes.  They  offend  both  the  letter  and 
the  spirit  of  the  constitution.  Experience  teaches  that  in  taxation 
when  the  law  gives  an  inch  an  ell  is  taken.  A  more  wholesome 
public  sentiment  would  perhaps  be  engendered  if  exemptions  were 
restricted  wholly  to  public  property." 

It  is  interesting  to  note,  in  this  connection,  that  custom  and 
the  temper  of  their  constituents  have  proved  all  sufficient  in  states 
whose  constitutions  leave  in  matters  of  taxation  to  the  legislature 
open  door  and  a  free  hand,  to  restrain  from  radical  and  startling 
innovations  in  tax  laws.  It  must  be  confessed,  however,  that  the 
greater  the  discretionary  power  of  the  legislature,  the  greater  is 
the  opportunity  for  corrupt  and  unscrupulous  members  to  levy 
blackmail  by  threatening  the  various  moneyed  interests  with  to 
them  unpalatable  legislation,  and  the  greater  is  the  need,  and  con- 
sequently the  greater  effort  on  the  part  of  the  threatened  interests 
to  elect,  where  possible,  their  own  men  to  the  legislature.  But 
good  results  are  often  worked  out  on  lines  far  from  ideal ;  as  Em- 
erson says,  in  substance,  "The  ways  of  Providence  and  of  a  white- 
chokered  student  of  divinity  are  not  the  same ;"  nobody  has  al- 
leged that  the  Pennsylvania  railroad  ever  went  to  a  prim  professor 
of  either  ethics  or  political  economy  for  a  program  ot  the  lines  on 
which,  under  the  wide-open  constitution  of  that  state,  it  should 
control  the  legislature ; — and  yet,  whether  designed  in  detail  or 
not  by  that  very  conservative  corporation,  the  Pennsylvania  rail- 
road, its  control  of  the  legislature  of  its  home  state  has  resulted 
in  the  best  system  of  taxation  that  any  state  in  the  Union  can 
show.  We  are  not  called  upon  to  fancy  that  the  Pennsylvania 
railroad  aimed  to  benefit  the  public,  or  to  benefit  anything  but 
itself.  It  seemingly  took  the  plan  of  procuring  moderate  taxation 
for  its  own  property  by1  seeing  to  it  assiduously  that  no  other 
moneyed  interest  should  escape.  This  cunning  policy  has  given  to 
the  state  abundance  of  revenue  and,  as  young  Mr.  Purdy  ingenu- 
ously confesses,  practical  immunity  from  the  tax-reformer.  It 
must  not,  however,  be  assumed  either  that  the  Pennsylvania  sys- 
tem is  perfect,  or  that  it  escapes  all  attempts  at  modification. 
They  created  a  tax  commission  there  in  1887,  and  another  in 
1889.  The  first  "reportod  a  revenue  bill,  a  principal  feature  of 


308  HERTIG    ON    TAXATION. 

which  was  the  substitution  of  a  single  tax  on  corporations,  to 
take  the  place  of  the  existing  taxes  thereon  on  capital  stock,  gross 
receipts,  and.  loans  or  bonded  indebtedness." — EASTMAN,  Taxa- 
tion for  State  Purposes  in  Pennsylvania  (Phila.,  1898),  p.  14. 
The  legislature  took  1:0  action  on  the  bill  so.  reported.  The  next 
commission  signaled  itself  by  a  divergence  of  opinion,  its  mem- 
bers failing  to  agree  on  any  measure.  They  "made  individual  re- 
ports, suggesting  various  changes  in  methods  of  taxation,  none 
of  which  was  made." — EASTMAN,  ibid. 

"In  1892  a  Pennsylvania  Tax  Conference  was  formed  by  the 
representatives  of  various  important  interests  in  the  state,  an  un- 
official but  highly  respectable  body,  owing  to  the  talents  and  earn- 
estness of  the  members  thereof.  The  object  of  the  commission 
was  to  supply  statistics  on  which  discussions  of  proposed  changes 
of  taxation  might  be  based.  It  has  been  mainly  owing  to  the  lack 
of  such  data  that  former  attempts  to  agree  upon  a  revision  of  the 
tax  laws  have  failed.  Two  preliminary  reports  were  made  by  this 
conference,  one  containing  much  valuable  information  relative  to 
objects  of  taxation  in  Pennsylvania,  and  the  other  giving  a  com- 
parative statement  of  the  tax  systems  of  all  the  states.  The  com- 
mission finally  reported  *  *  *  [a]  revenue  bill,  introduced  at 
the  session  of  1895."  *  *  * — EASTMAN,  xv.  The  legislature 
proceeded,  as  regards  the  proposed  measure,  with  extreme  cau- 
tion. It  instructed  by  resolution  the  auditor-general  "to  procure 
from  all  corporations  in  the  state  reports  made  in  the  manner  re- 
quired by  the  tax  bi!4  then  pending,  and  to  make  feigned  settle- 
ments thereon  [make  returns  as  if  the  bill  were  a  law],  in  order 
to  ascertain  whether  the  proposed  system  would  produce  an  equal 
amount  of  revenue  with  the  old.  Such  reports  were  to  be  obtained 
for  two  successive  years.  They  have  already  been  obtained  for 
one  year,  and  have  been  recently  required  for  the  second  year.  It 
is  understood  that  the  statistics  thus  far  obtained  have  failed  to 
show  that  the  proposed  measure  would  produce  the  necessary 
amount  of  revenue." — EASTMAN,  ibid. 

Corporations  in  Pennsylvania  pay  an  annual  tax  of  five  mills 
upon  each  dollar  of  the  actual  value  of  the  whole  capital  stock 
of  all  kinds,  including  common,  special  and  preferred.  "The  stock 
must  not  be  assessed  at  less  than  the  average  price  at  which  it 
shall  have  been  sold  during  the  tax-year,  but  it  may  and  should  be 
appraised  at  more  than  such  average  price  if  the  value  of  the  cap- 
ital stock  between  November  ist  and  I5th  was  greater  than  such 
average  price." — Commonwealth  v.  Pcnna.  R.  R.,  145  Pa.  74, 
ap.  EASTMAN,  53. 

Pennsylvania  courts  hold  that  "the  tax  upon  capital  stock  of 
corporations  is  a  tax  upon  their  property,  franchises,  assets  and 


HERTIG    ON    TAXATION.  309 

earning  capacity." — EASTMAN,  p.  50,  citing'  Fox's  Appeal,  112 
Pa.  337,  and  other  cases.  They  hold  also  that  "the  tax  upon  cap- 
ital stock  is  constitutional." — KASTMAN,  p.  50,  citing  Common- 
wealth v.  National  Oil  Company,  157  Pa.  515,  and  Commonwealth 
v.  Mill  Creek  Coal  Co.,  157  Pa.  524.  "So  much  of  the  capital 
stock  of  corporations,  limited  partnership  and  joint-stock  associ- 
ations, organized  for  manufacturing  purposes,  as  is  invested  in, 
and  actually  and  exclusively  employed  in  carrying  on  manufac- 
turing within  the  state  (except  companies  engaged  in  the  brewing 
or  distilling  of  spirits  or  malt  liquors,  and  such  as  enjoy  and  ex- 
ercise the  right  of  eminent  domain)  is  exempt  from  the  tax  on 
capital  stock,  but  so  much  of  the  capital  stock  of  said  companies, 
so  organized,  as  may  be  invested  in  any  property  or  business  not 
strictly  incident  or  appurtenant  to  their  manufacturing  business, 
is  subject  to  said  tax." — EASTMAN,  pp.  59-60. 

It   is   constitutional   to    exempt   manufacturing   corporations, 
and  in  making  such  exemption  it  is  constitutional  to  exclude  from 
it  "corporations  engaged  in  the  manufacture  of  spirituous  or  malt 
liquors,  or  having  and  enjoying  the  right  of  eminent  domain. "- 
EASTMAN,  ibid. 

Banks,  savings  institutions,  and  foreign  insurance  companies 
are  not  subject  to  the  foregoing  mode  of  taxation.  Private  bank- 
ers and  brokers,  incorporated  banks  and  savings  institutions  (hav- 
ing no  capital  stock)  are  subject  to  a  tax  of  three  per  cent  upon 
the  amount  of  their  net  earnings  or  income.  All  incorporated 
banks,  or  those  having  corporate  capital,  may  at  their  option  pay 
a  tax  of  four  mills  on  the  dollar  of  the  actual  value  of  their  shares, 
arrived  at  by  adding  to  the  amount  of  capital  stock  paid  in  the 
surplus  and  undivided  profits  ;  or  they  may  at  their  option  pay 
annually  a  tax  of  ten  mills  on  the  dollar  of  the  par  value  of  their 
shares.  Such  option  favors,  of  course,  those  banks  whose  surplus 
and  undivided  profits  aggregate  more  than  one  and  one-half  times 
their  capital.  The  payment  of  such  tax  exempts  them  from  all 
local  taxation  except  on  their  real  estate.  By  a  fiction  of  law, 
usual  in  the  states,  such  tax  is  regarded  as  assessed  upon  and  as 
paid  by  the  shareholders  on  their  respective  shares,  though  in 
practical  effect  assessed  to  and  paid  by  the  bank.  Foreign  insur- 
ance companies  pay  a  tax  of  two  'per  cent  on  premiums  received 
within  the  state,  whether  received  "in  money,  or  in  the  form  of 
notes,  credits,  or  other  substitutes  for  money." 

In  addition  to  the  capital  stock  tax  just  described,  "all  trans- 
portation and  transmission  companies  of  every  description  are 
subject  to  a  tax  of  eight  mills  on  the  dollar  of  their  gross  re- 
ceipts derived  from  passengers  and  freight  traffic  transported 
wholly  within  the  state,  and  from  telegraph,  telephone  and  ex- 


310  HERTIG    ON    TAXATION. 

press  business  done  wholly  within  the  state,  .and  all  electric  light 
companies  are  subject  to  a  like  tax  upon  their  gross  receipts — 
[in  so  far  as]  derived  'from  [their]  business  *  [as]  electric 
light  companies.'  '  —EASTMAN,  p.  81.  The  tax  on  gross  re- 
ceipts applies  to  "every  railroad  company,  pipe-line  company, 
conduit  company,  steamboat  company,  canal  company,  slack  wa- 
ter navigation  company,  transportation  company,  street  passen- 
ger railway  company,  and  every  other  company,  joint-stock  as- 
sociation or  limited  partnership,  now  or  hereafter  incorporated 
or  organized  by  or  under  any  law  of  this  commonwealth,  or  now 
or  hereafter  organized  or  incorporated  by  any  other  state  or  by 
the  United  States  or  any  foreign  government,  and  doing  busi- 
ness in  this  commonwealth,  and  owning,  operating,  or  leasing 
to  or  from  another  corporation,  company,  association,  joint- 
stock  association  or  limited  partnership,  any  railroad,  pipe  line, 
slack  water  navigation,  street  passenger  railway,  canal,  or  other 
device  for  the  transportation  of  freight  or  passengers  or  oil,  and 
every  telephone  or  telegraph  company  incorporated  under  the 
laws  of  this  or  any  other  state  or  of  the  United  States  and  doing 
business  in  this  commonwealth,  and  every  express  company,  in- 
corporated or  unincorporated,  doing  business  in  this  common- 
wealth, and  every  firm,  copartnership,  or  joint-stock  company  or 
association  doing  express  business  in  this  commonwealth,  and 
every  firm,  co-partnership,  or  joint-stock  company  or  associa- 
tion doing  express  business  in  this  commonwealth,  and  every 
electric  light  company  and  every  palace  car  and  sleeping  car 
company  incorporated  or  unincorporated,  doing  business  in  this 
commonwealth." — Act  of  June  i,  1889.  Sec.  23  (Pa.  Laws  of 
1889,  p.  420),  Ap.  EASTMAN,  pp.' 81-2.  This  gross  earnings  tax 
is  historically  a  later  tax  than  the  tax  on  capital  stock,  and  as  the 
capital  stock  tax.  "is  a  tax, upon  *  property,  franchises,  as- 
sets and  earning  capacity,"  (see  above),  it  should  follow  logi- 
cally fhat  the  Pennsylvania  gross-earnings  tax,  if  technically  a 
tax  upon  "property,"  is  double  taxation.  The  conclusion  that  it 
constitutes  double  taxation  may  be  avoided  by  holding  that  it  is 
technically  a  franchise  tax  and  not  a  property  tax.  "The  su- 
preme court  of  the  United  States,  in  Phila.  &  Reading  R.  R. 
Co.  v.  Penna,  15  Wall.  284,  intimates  that  this  may  be  the  case, 
and  similar  taxes  in  other  states  have  been  directly  ruled  to  be 
franchise  taxes,  notably  in  Maryland  where  it  was  held  in  State 
v.  [Baltimore  &  Ohio  R.  R.  Co.]  48  Md.  49,  that  a  similar  tax 
was  not  upon  property,  but  'a  tax  upon  the  franchise  of  the  cor- 
poration, measured  by  its  business.' '  —EASTMAN,  p.  83. 

The  tax  on  gross  receipts  is  subject  to  the  limitation  imposed 
by  the  Constitution  of  the  United   States,  as  construed  by   the 


HERTIG    ON    TAXATION.  311 

highest  federal  court,  that  such  tax  cannot  lawfully  be  imposed 
by  any  state  'upon  so  much  of  the  gross  receipts  as  is  derived 
from  interstate  commerce. — Phila.  &  Southern  S.  S.  Co.  v. 
Pennsylvania,  122  U.  S.  326,  which  case  questions  in  part  the 
case  in  15  Wall.  284,  though  not  its  franchise  intimation,  except 
to  hold  that  in  the  case  at  bar,  gross  earnings  tax  was  but  a  fran- 
chise tax:  Telegraph  companies,  for  instance,  ''are  liable  to 
tax  only  on  gross  receipts  derived  from  messages  transmitted 
wholly  within  the  state." — Western  Union  Telegraph  Co.  v.  Pa.} 
128  U.  S.  39.  In  consequence  of  such  rulings  by  the  supreme 
court  of  the  United- States,  Sec.  23  of  the  Pa.  act  of  June  i,  1889, 
above  cited  conforms  to  them  by  limiting  said  tax  to  the  gross 
receipts  "received  from  passengers  and  freight  traffic  trans- 
ported wholly  within  this  state,  and  from  telegraph,  telephone, 
or  express  business  done  wholly  within  this  state,  or  from  busi- 
ness of  electric  light  companies,  and  from  the  transportation  of 
oil  done  wholly  jwithin  the  state." 

The  third  and  further  tax  which  corporations  pay,  the  tax  on 
corporate  loans,  applies,  of  course,  only  to  those  corporations 
which,  have  bonds  or  other  evidences  of  indebtedness  outstand- 
ing. This  tax,  in  form,  is  paid  out  of  the  lender's  money,  since 
it  is  collected  through  the  corporations;  they  by  law  must  de- 
duct the  amount  of  the  tax  out  of  interest  payments  to  the  hold- 
ers of  their  obligations.  County  and  other  municipal  loans  are 
subject  to  the  like  tax;  that  is,  the  holder  of  county,  city,  or  other 
like  bonds,  must  stand  a  deduction  from  the  interest  accruing 
to  him,  which  is  held  back  by  the  county,  city  or  other  treasurer, 
and  is  paid  by  such  treasurer  directly  to  the  state.  This  tax  on 
corporate  and  municipal  loans  'is  at  the  same  rate, — "four  mills 
on  the  dollar  of  the  nominal  value  thereof," — and  is  of  the  na- 
ture of  an  income  tax. 

"Inasmuch  as  such  loans  are  always  supposed  to  be  of  record 
with  the  corporations,  counties  and  municipalities  issuing  them, 
it  was  deemed  better  for  the  purpose  of  accurately  collecting 
the  tax  thereon  to  make  such  corporate,  county  and  municipal 
obligations  separate  subjects  of  taxation,  and  to  require  the 
treasurers  of  the  corporations,  counties,  and  municipalities  is- 
suing them  to  collect  the  tax  by  deducting  it  from  the  interest 
paid  thereon,  rather  than  to  depend  upon  the  holders  of  the  ob- 
ligations returning  them  to  the  local  assessors  for  taxation. "- 
EASTMAN.,  p.  66.  This  tax  is  in  fact,  "the  state  tax  imposed 
and  provided  on  mortgages,  money  owing  by  solvent  debtors," 
etc. — Commonwealth  v.  Lehigli  Valley  R.  R.  Co.,  120  Pa.  445. 
By  Section  I,  act  of  June  I,  1889,  as  amended  by  the  act  of  June 
8,  1891,  "all  mortgages,  all  moneys  owing  by  solvent  debtors,  * 


312  HERTIG    ON    TAXATION. 

*  *  all  articles  of  agreement  and  accounts  bearing  interest, 
all  public  loans  whatsoever,  except  those  issued  by  this  common- 
wealth or  by  the  United  States,"  as  well  as  certain  other  sub- 
divisions of  moneyed  capital  therein  mentioned — are  "made  tax- 
able annually  for  state  purposes  at  the  rate  of  four  mills  on  each 
dollar  of  the  value  thereof." — EASTMAN,  p.  153. 

"The  tax  upon  the  loans  of  counties  and  municipalities  is 
constitutional." — EASTMAN,  p.  69,  citing  Commonwealth  v.  Ches- 
ter City,  123  Pa.  623.  But  "outstanding  bonds  of  a  city,  pur- 
chased by  it,  and  held  in  its  sinking  fund,  are  not  taxable,  *  * 
nor  are  those  which  are  overdue,  outstanding,  and  unredeemed." 
EASTMAN,  pp.  69-70. 

The  application  of  the  tax  on  loans  is  limited  by  a  decision  of 
the  supreme  court  of  the  United  States  to  residents  of  the  state ; 
loans  held  by  non-residents  of  Pennsylvania  are  not  taxable  by 
her. — State  Tax  on  Foreign  Held  Bonds,  15  Wall.  300.  While 
such  tax  ultimately  falls  upon  the  borrower,  that  is  in  so  far  as 
it  may  be  effectively  collected,  yet  so  long  as  it  is  moderate  in 
amount,  it  is  at  least  an  open  question  if  the  lender  would  not 
rather  take  a  less  interest  and  pay  his  four  mill  tax  than  get  a 
higher  rate  and  at  the  same  time  perjure  himself,  or  use  other 
devices  to  "cover"  his  bonds,  mortgages  and  other  "credits" 
against  an  impending  tax  of  3  per  cent  on  the  capital  thereby 
represented. 

The  three  taxes  above  described,  as  well  as  the  others  item- 
ized below,  are  paid  directly  into  the  state  treasury,  which 
receives  an  aggregate  annual  revenue  of  many  millions  of  dol- 
lars;— in  the  year  ending  Nov.  30,  1899,  which  is  the  last  whose 
figures  are  before  me  the  total  gross  revenue  of  the  state  treas- 
ury of  Pennsylvania  was  $15,158,462.15.  Of  this  sum  there  was 
received  from  the  U.  S.  government  on  account  of  "war  claims 
for  mobilization  of  troops,"  $164,983.10;  deducting  which  leaves 
revenue  proper,  $14,993,479.05. 

I  classify  the  receipts  that  go  into  the  making  up  of  this  im- 
mense sum,  in  the  order  of  their  size,  and  tabulate  them  here  as 
giving  a  better  insight  into  the  practical  workings  of  the  Penn- 
sylvania system  than  many  pages  of  comment: 
From  tax  on  capital  stock  (above  described)  .  $4,575,511.88 
From  tax  on  personal  property  (bonds,  mortgages 

and  other  moneyed  capital) 2,764,258.48 

From  tax  on  corporate  loans  (above  described).  .  .    1,149,409.65 

From  tax  on  collateral  inheritances 933,594.41 

From  bonus  on  charters  (incorporations  fees,  1-3 
of  i  per  cent  in  some  cases,  1-4  of  i  per  cent 
in  others)  780,626. 70 


HERTIG    ON     TAXATION.  318 

From  tax  on  corporate  gross  receipts  (above  de- 
scribed)           748,214.37 

From  tax  on  premiums   646,775 . 75 

From  tax  on  bank  stocks 548,810. 17 

From  retail  liquor  licenses 536,892.31 

From  mercantile  licenses   518,148.65 

From  wholesale  liquor  licenses ,  ,      448,686.74 

From  brewers'  and  distillers'  licenses 244,235. 19 

From  bottlers'  licenses   156,822.06 

From  tax  on  fees  of  office 151,599.65 

From  tax  on  writs,  wills,  and  deeds 144,021 .22 

From  tax  on  income  (3  per  cent  as  described).  .  .  .         96,126.06 

From  tax  on  gross  premiums   61,882.87 

From  billiard  licenses   42,466. 25 

From  interest  on  state  deposits   36,424.  n 

From  tax  on  building  and  loan  association  stock.  .  .         30,431 .71 

From  brokers'  licenses   29,787.95 

From  personal  fees 27,240. 53 

From  notary  public  commissions 22,150.00 

From  oleomargarine  licenses   .- 18,882.46 

From  theater  and  circus  licenses 18,382.66 

From  eating-house  licenses 17,794.24 

From  auctioneers'  licenses   14,325.45 

From  fertilizer  license  fees    13,900.00 

From  annuity  for  right  of  way 10,000 .  oo 

From  escheats   6,694 . 21 

From  fees  for  breach  of  oleomargarine  laws 4>552  •  3° 

From  tax  on  other  gross  receipts .          4,120.01 

From  peddlers'  licenses 1,296.70 

While  there  seems  to  be  some  doubt  whether  a  strict  construc- 
tion of  the  Pennsylvania  laws  as  they  now  are  would  authorize 
the  exemption  of  corporation  property,  corporation  shares,  mort- 
gages, bonds,  and  other  moneyed  capital  from  all  local  taxation,  it 
seems  to  be  the  practice  to  construe  them  generally  in  favor  of 
such  exemption. — EASTMAN,  163.  The  state  revenue  is  collected 
through  the  counties.  Out  of  the  auditing  and  paying  by  the 
state  to  the  counties  "all  the  expenses  of  collection  of  every  kind" 
incurred  by  them,  including  the  remitting  of  uncollectible  taxes, 
etc., — such  auditing  and  paying  being  "matters  of  great  labor 
and  considerable  vexation  of  spirit  to  the  Board  of  Revenue 
Commissioners," — grew  the  suggestion  to  the  legislature,  and  its 
'vloption  thereof,  that  "a  fixed  proportion  of  the  tax  [so  collected] 
e-bould  be  returned  to  *  *  *  [the  counties]  annually,  the 
(Tmnties  to  Day  therefrom  all  expenses  of  every  kind  connected 
with  the  tax."  The  proportion  to  be  returned  was  first  fixed  at 


314  HERTIG    ON    TAXATION. 

one-third. — Act  of  June  i,  1889.  "In  1891,  when  there  appeared 
to  be  great  danger  of  the  passage  of  the  'Granger'  Revenue  Bill, 
then  pending,  it  was  agreed  as  a  sop  to  Cerberus,  to  increase  the 
proportion  to  be  returned  to  three-fourths,  which  was  accordingly 
done,  *  *  *  It  will  probably  be  impossible  for  the  Com- 
monwealth ever  to  discontinue  this  donation  and  reassume  its  own, 
no  matter  how  badly  it  may  need  revenue." — EASTMAN,  162,  in 
Note.  The  receipt  by  the  counties  of  such  large  sums  from  the 
state  treasury  tends  to  make  them  careful  in  considering  proposed 
changes  in  the  system ;  and  besides  does  away  with  all  wrangling 
before  a  state  board  of  equalization  as  to  the  valuations  which 
shall  prevail  in  the  respective  counties. 

The  counties,  therefore,  have  exclusive  jurisdiction  in  the 
matter  of  assessing  property  subject  to  local  taxation.  It  is 
assessed  every  three  years  "under  the  authority  of  the  commis- 
sioners of  the  several  counties."  Anyone  dissatisfied  with  his 
assessment  may  appear  before  the  county  commissioners  and  seek 
to  have  it  corrected.  An  appeal  from  the  commissioners  lies  to 
the  court  of  common  pleas,  which  is  a  court  of  general  jurisdic- 
tion. 

Eastman's  description  of  the  property  subject  to  local  taxa- 
tion in  Pennsylvania  is  very  simple : 

.  "i.  Real  estate,  viz.:  All  houses,  lands,  lots  of  ground,  and 
ground-rents,  mills  and  manufactories  of  all  descriptions,  all  fur- 
naces, forges,  bloomeries,  distilleries,  sugar  houses,  malt  houses, 
breweries,  tan  yards,  and  ferries. 

"2.  The  following  personal  estate,  viz. :  All  horses,  mares, 
geldings,  and  cattle  above  the  age  of  four  years. 

"3.  All  offices  and  -posts  of  profit,  professions,  trades,  and 
occupations,  and  all  single  freemen  above  the  a<^e  of  twenty-one 
years  who  shall  not  follow  any  occupation  or  calling." — P.  235. 

"So  much  of  the  real  estate  of  public  corporations  a's  may  be 
essential  to  the  exercise  of  their  corporate  franchises  is  exempt 
from  all  county  and  local  taxation." — EASTMAN,  pp.  235-6,  and 
cases  there  cited.  "The  tracks,  depots,  rolling  stock,  etc.,  of  rail- 
road companies  are,  therefore,  exempt  from  taxation  for  local 
purposes,  but  the  property  of  such  public  corporations  which  is 
not  essential  to  the  exercise  of  their  corporate  privileges  is  so 
taxable.  'Corporations  formed  for  private  purposes  can  claim  no 
exemption. — Cwbp.n  Iron  Co.  v. Carbon  County,  30  Pa.  251.  "Ma- 
chinery so  attached  as  to  become  fixtures  is  taxable  as  real  estate. 
—Patterson  v.  Del  Co.,  70  Pa.  381."— Ibid. 

The  above  details  as  to  taxation  in  Pennsylvania  are  particu- 
larly appropriate  for  illustration  and  study  in  considering  changes 
proposed  in  those  state  constitutions  which,  like  Minnesota's,  limit 


HERTIG    ON    TAXATION.  315 

closely  the  power  of  the  legislature  as  regards  the  scope  of  tax 
laws.  Said  details  are  of  special  importance,  when  it  is  remem- 
bered that  the  legislative  facts  which  they  set  forth  arose  under  a 
"wide-open"  constitution, — from  which,  in  fact,  the  tax  commis- 
sion, as  already  stated,  copied  the  principal  one  of  the  amendments 
appended  to  i-ts  code  and  recommended  for  adoption  in  Minne- 
sota. 

The  constitution  of  Pennsylvania,  as  regards  taxation,  may  be 
said  to  have  followed  the  law  rather  than  to  have  caused  the  law 
to  follow  it.  Indeed,  the  supreme  court  of  that  state  has  said 
that  her  present  constitution,  adopted  in  1873,  merely  declares  the 
pre-existing  law  of  taxation  as  it  there  prevailed.  Constitutions 
of  the  "wide-open"  character  may  be  classed  as  such  by  their  ex- 
press terms  or  by  judicial  construction.  Pennsylvania's  is  of  the 
former,  Wisconsin's  and  New  Jersey's  of  the  latter  sort.  It  is 
worthy  of  note  that  like  stage  of  development  of  like  people  at 
substantially  the  same  time,  in  adjoining  states  much  alike  "in 
needs  and  climate,  has,  in  the  case  of  Wisconsin  and  Minnesota, 
drawn  them  very  near  together  as  regards  the  character  and  prac- 
tical effect  of  their  tax  laws,  notwithstanding  the  divergence  in 
their  respective  constitutions  and  statutes  on  this  subject.  Wis- 
consin, with  a  much  more  stringent  oath-bound  law  for  assessing 
property  than  Minnesota  has,  contrives  to  reach  about  the  same 
percentage  of  personal  property  as  Minnesota.  Minnesota  has  by 
contract  a  gross  earnings  tax  law  for  railroad  corporations,  as 
already  stated  (ch.  ix)  ;Wisconsin  has  the  like  gross  earnings  tax 
by .  statute  which  her  supreme  court  has  sustained  despite  that 
clause  of  her  constitution  which  runs  thus  :  "The  rule  of  taxation 
shall  be  uniform,  and  taxes  shall  be  levied  upon  such  property 
as  the  legislature  shall  prescribe."  This  clause,  by  the  way,  is  all 
that  the  Wisconsin  constitution  says  upon  taxation.  But  how  can 
taxation  be  held  "uniform"  where  an  average  tax  of  three  per  cent 
is  levied  upon  such  "credits  and  other  moneyed  capital"  as  the  as- 
sessor may  find,  and  a  tax  of  three  or  four  per  cent  is  levied  on 
the  gross  income  of  railroads?  It  is,  to  borrow  Hamlet's  expres- 
sion, "as  easy  as  lying,"  and  is  usually  achieved  in  much  the  same 
way..  Of  course,  an  exceptionally  frank  judge  might  say,  and 
with  great  propriety,  that  in  so  far  as  the  law  declares  that  it 
values  credits  and  moneyed  capital  at  their  "full  and  true  value," 
and  levies  a  tax  according  to  the  same,  the  law  is  itself  a  liar,  and 
levies  in  fact  an  income  tax  as  I  have  above  (p.  269)  demonr 
strated  in  the  case  of  bank  stocks ;  and  he  might  further  say  that 
the  levying  of  a  gross  earnings  tax  is  in  effect  an  approach  to  the 
only  equality  and  uniformity  within  the  power  of  the  law  to  reach 
even  approximately,  and  so  is  not  in  conflict  with  the  "uniform" 


•316  HERTIG     ON     TAXATION. 

clause  in  state  constitutions.  But  judges  are  seldom  that  frank, 
even  when  that  perspicuous. 

It  is  also  worthy  of  note,  as  regards  Wisconsin,  that,  although 
she  might  constitutionally  tax  church  property,  graveyards,  etc., 
which  many  constitutions,  including  Minnesota's,  expressly  ex- 
empt, yet  neither  in  what  she  has  chosen  to  tax  or  chosen  to  ex- 
empt is  there  any  matter  showing  abuse  of  legislative  discretion, 
or  any  marked  departure  from  the  practice  in  these  respects  pre- 
vailing generally  in  the  American  states.  This  point  is  interest- 
ing, because  it  refutes  in  a  practical  way  the  objections  occasion- 
ally made  last  winter  to  the  amendments  proposed  by  the  tax  com- 
mission, that  should  they  become  a  part  of  the  constitution,  Min- 
nesota might  use  the  privilege  thereby  open  to  her  to  tax  church 
property.  And  it  is  again  and  particularly  worthy  of  note  that 
the  simple  taxation  plank  of  her  constitution  has  proven  so  satis- 
factory to  the  people  of  Wisconsin,  that  it  stands  unamended, 
and  has  so  stood  ever  since  Wisconsin's  admission  as  a  state  into 
the  Union. 

New  Jersey  is  another  state  whose  constitution,  by  its  brevity 
on  the  subject  of  taxation,  readily  lends  itself  to  judicial  construc- 
tion giving  to  it  a  "wide-open"  character.  Paragraph  12  of  sec.  7 
of  art.  IV.,  of  the  New  Jersey  constitution,  contains  all  that  its 
framers  chose  to  say  for  the  guidance  and  restriction  of  the  legis- 
lature in  the  matter  of  assessment  for  taxes.  Said  paragraph  is 
as  follows :  "Property  shall  be  assessed  for  taxes  under  general 
laws,  and  by  uniform  rules,  according  to  its  true  value." 

New  Jersey,  as  the  home  of  most  of  the  "trusts,"  deserves 
special  mention.  She  encourages  the  large  corporations  to  make 
their  technical  home  within  her  borders  by  enacting  laws  nicely 
designed  to  secure  to  New.  Jersey  corporations  all  the  advantages 
of  corporate  organization  combined  with  such  strict  imposition  of 
technical  requirements,  as  will  just  save  them  from  being  ad- 
judged "tramp"  corporations.  Wide-open,  but  not  too  wide-open, 
is  her  policy  in  that  behalf.  A  "tramp"  corporation,  by  the  way, 
is  one  formed  nominally  in  a  given  state,  under  the  wide-open  laws 
thereof, — its  stockholders  being  practically  all  non-residents,  and 
the  corporation  keeping  no  books,  no  office,  and  transacting  no 
business  in  the  state  of  its  incorporation.  The  stockholders  of  a 
"tramp"  corporation  are  in  fact  partners,  and  subject  to  the  unlim- 
ited liabilities  thereof. 

New-  Jersey,  however,  in  building  a  comfortable  and  bomb- 
proof technical  home  for  vagrant  corporations,  charges  an  aris- 
tocratic rental  for  the  same — aristocratic  as  compared  with  the 
plebeian  rates  charged  in  some  of  the  too  wide-open  states.  Evi- 
dently, however,  she  charges  no  more  than  "the  traffic  will  bear/' 


HERTIG    ON    TAXATION.  317 

or  than  her  "high-rolling"  lodgers  are  willing  to  pay.  She  not 
only  gets  tidy  fees  for  incorporations  (aggregating  $404,429.94 
for  the  year  ending  Oct.  31,  190x3,  and  $588,319.30  for  the  year 
ending  Oct.  31,  1901),  but  she  collects  an  annual  tax  of  i-io  of  i 
per  cent  on  the  capital  stock  of  corporations — at  that  rate  on 
amounts  of  capital  ''up  to  and  including  three  million  dollars, 
and  at  a  less  rate  on  amounts  in  excess  of  that  sum."  Besides 
the  fees  above  mentioned"  received  for  incorporations  in  the  two 
years  ending,  respectively,  Oct.  31,  1900,  and  Oct.  31,  1901,  her 
state  tax  on  corporations  other  than  railroad  and  canal  corpora- 
tions, for  these  two  years,  yielded  $1,494,719.70  and  $1,633,074.19. 
She  does  not  in  so  many  words  say,  "Special  rates  to  big  trusts," 
but  her  laws  plainly  imply  that  motto.  Now  it  will  naturally 
occur  to  the  unsophisticated  reader  that  while  such  laws  may 
yield  to  New  Jersey  large  revenues,  it  would  seem  that  they  do  not 
conform  to  her  constitution,  for  that  the  taxes  thereby  collected 
are  not  assessed  "under  general  laws  and  by  uniform  rules,  ac- 
cording" to  the  "true  value"  of  the  property.  Here,  too,  the 
answer  is  easy.  The  New  Jersey  law  calls  this  tax  "an  annual 
license  fee  or  franchise  tax."  "It  is  not  a  tax  on  property,  and 
not  within  the  equality  clause  of  the  constitution." — Standard  Un- 
derground Cable  Co.  v.  Attorney  General,  i  Dick.  Ch.  Rep.  270. 

"It  would  appear,  from  a  cursory  reading  of  the  tax  laws  of 
New  Jersey,  that  all  the  state  taxes  imposed  thereby  on  corpora- 
tions are  denominated  'franchise  taxes,'  with  the  obvious  intention 
of  placing  them  beyond  the  provisions  of  the  equality  clau?e  of 
the  state  constitution." — EASTMAN,  p.  50. 

As  might  have  been  safely  predicted  in  advance,  the  Minne- 
sota tax  commission's  proposed  amendments  to  the  constitution 
could  no  more  run  the  gauntlet  of  further  amendment  and  come 
out  whole  than  could  the  commission's  proposed  tax  code. 
Amongst  others  the  attorney  general  of  the  state,  W.  B.  Douglas, 
proposed,  in  lieu  of  those  offered  by  the  commission,  a  somewhat 
different  set,  and  by  no  means  lacking  in  merit.  He  prefaced  his 
new  section  i  with  a  clause  from  that  section  nearly  as  it  now 
stands, — "All  taxes  shall  be  as  nearly  equal  as  may  be."  This 
sounds  well ;  and  if  the  current  estimate  of  the  public  mind  be 
correct,  so  that  it  is  really  attuned  to  the  jingle  of  this  phrase, 
and  would  be  suspicious  of  a  constitution  that  should  omit  the 
same,  then  its  insertion  and  retention  can  be  defended  on  diplo- 
matic grounds.  But  without  a  special  clause  giving  technical 
significance  to  "equal,"  it  offers  us  the  alternative  of  becoming 
meaningless  or  mischievous.  There  is  an  equality  of  rate  and  an 
equality  of  ability  to  pay  not  measured  by  equality  of  rate  or 
equality  of  justice.  The  principle  of  equality  of  rate  has  been 


318  HERTIG    ON    TAXATION. 

formally  abandoned  in  some  cases,  as  in  the  inheritance  tax  laws 
and  income  tax  laws ;  and  the  state  of  Pennsylvania  has  gone  so 
far  as  to  abandon  it  in  taxing  real  estate.  Equality  of  rate  should 
be  abandoned  in  levying  gross  earnings  taxes.  A  struggling  elec- 
tric railway  may  earn  gross  two  or  three  thousand  dollars  per 
mile;  the  Twin  City  Rapid  Transit  Company,  operating  in  St. 
Paul  and  Minneapolis,  earns  gross  $12,500  per  mile;  the  Metro- 
politan Street  Railway  of  New  York  city  earns  gross  $75,000  ptrr 
mile  per  annum.  What  of  a  gross  earnings  tax  that  would  levy 
the  same  per  cent  on  all  three?  What  in  fine  of  a  tax  law  that 
derives  pat  illustration  by  comparing  it  to  the  proposition,  All 
gimlets  shall  bore  holes  "as  nearly  equal  as  may  be"  to  auger- 
holes  ? 

The  attorney  general  further  in  his  section  i  incorporated  the 
commission's  curt  declaration,  "The  power  of  taxation  shall  never 
be  surrendered  or  suspended ;"  and  to  take  a  "bond  of  fate," 
make  assurance  doubly  sure,  and  have  another  thrust  at  the  Dart- 
mouth College  case  (p.  61,  above),  he  closed  the  section  by  add- 
ing, "All  legislative  enactments  involving  the  same  shall  be  sub- 
ject to  amendments  or  repeal." 

His  section  2  wholesomely  nullifies  the  "All  taxes  shall  be  as 
nearly  equal  as  may  be"  of  his  section  i,  by  making  all  taxes 
"uniform  upon  the  same  class  of  subjects."  For  the  rest,  his 
section  2  differs  from  the  commission's  section  2  only  in  dropping 
out  "within  the  territorial  limits  of  the  authority  levying  the 
taxes."  This  omission  was  further  precaution  against  local  op- 
tion in  taxation. 

His  section  3  drops  completely  the  local  option  provisions  of 
the  commission's  section  3,  and  consists  wholly  of  a  nearly  exact 
copy  of  the  corresponding  section  in  the  constitution  as  it  is.  The 
changes  he  makes  are  important,  and  would  put  taxation  squarely 
on  the  basis  laid  down  in  his  section  2.  Where  the  constitution 
provides  that  "laws  shall  be  passed  taxing  all  moneys,  credits," 
etc.,  according  to  their  "true  value  in  money,"  Douglas  in  his 
section  3  provides  that  they  shall  be  taxed  "on  the  basis  set  forth 
in  [his]  said  section  2,"  which  permits  the  practical  flexibility  in 
classification  and  rate  so  well  illustrated  in  Pennsylvania  practice, 
and  above  set  forth  with  some  fulness  of  detail.  His  section  3 
makes  no  other  change  in  said  section  of  the  constitution,  except 
that  in  enumerating  its  exemption,  he  enlarges  the  constitution's 
permitted  individual  exemption  of  personal  property  ($200.00) 
to  $300.00,  but  limits  it  to  "the  head  of  the  family." 

His  section  4  is  the  same  as  tne  commission's  section  4,  except 
that  he  has  "by  general  law,"  where  the  commission  has  "by  a  gen- 
eral law  or  special  act."  On  the  whole  it  may  be  said  that  his 


HERTIG  ON  TAXATION.  319 

amendments,  if  adopted,  would,  like  those  of  the  commission, 
have  signalled  distinct  progress,  and  probably  have  polled  a  larger 
vote  than  the  commission's  on  submission  to  the  people.  But  as 
neither  set  passed,  further  excursion  into  the  realm  of  conjecture 
need  not  pass. 

State  Auditor  Dunn  favored  amendments  exempting  house- 
hold furniture  to  the  value  of  $350.00,  exempting  bank  deposits 
up  to  $400.00  for  each  individual,  firm,  or  corporation,  exempting 
all  state  securities.  Wallace  (Rep.),  of  Hennepin,  introduced 
in  the  House  a  bill  for  amendments  embodying  Auditor  Dunn's 
recommendations.  Representative  Dunn  (Rep.),  of  Hennepin, 
offered  a  bill  of  his  own  differing  materially  in  tKe  amendments 
it  proposed  from  those  of  the  commission,  and  more  restrictive  of 
the  powers  of  the  legislature. 

The  judiciary  committees  of  House  and  Senate  finally  intro- 
duced into  their  respective  branches  each  a  bill  for  amendments. 
These  bills  were  much  alike,  showing  that  both  committees  were 
moved  by  substantially  like  considerations — the  need  of  a  compro- 
mise between  open-door  and  closed-door  views.  Each  the  House 
and  Senate  bills  (House  File  55  and  Senate  File  90)  as  introduced 
by  their  respective  committees  retained  the  stereotyped  phrase, 
"All  taxes  to  be  raised  in  this  state  shall  be  as  nearly  equal  as 
may  be" ;  retained  also  the  established  provision  that  taxable 
property  "shall  have  a  cash  valuation  and  shall  be  equalized  and 
uniform  throughout  the  state,"  but  qualified  it  with  the  import- 
ant new  condition  "except  as  herein  otherwise  provided ;  borrowed 
from  the  commission  and  ornamented  with  joint  terminal,  "the 
power  of  taxation  shall  never  be  surrendered,  suspended  or  con- 
tracted away" ;  authorized  the  levy  and  collection  of  an  annual  tax 
"upon  franchises  granted  by  public  authority"  (H.  F.  55),  "upon 
all  franchises  granted  by  the  state  or  any  subdivision  thereof" 
(S.  F.  90),  or  in  lieu  thereof  such  tax  upon  gross  earnings  as  the 
legislature  might  determine — the  "franchise  or  gross  earnings 
tax"  so  imposed  to  be  "in  addition  to  the  tax  on  the  real  and  per- 
sonal property  of  such  person  or  corporation"  (House),  no  men- 
tion of  it  as  being  in  addition  to  something  (Senate)  ;  retained 
from  the  present  constitution  almost  verbatim  the  inheritance 
clause  which  stands  at  the  end  of  section  I,  art.  IX. ;  retained  the 
"assessments  for  local  improvements"  clause  of  said  section,  to 
which  the  Senate  added  in  its  bill  the  "water  pipes"  clause  of  the 
same  section.  Both  bills  authorized  a  tax  upon  the  income  of  all 
credits  owned  by  persons  or  corporations,  "as  such  credits  are 
now  or  may  be  hereafter  defined  by  law"  "and  also  upon  the 
income  of  all  persons  in  this  state  above  the  sum  of  one  'thousand 
dollars  per  annum,  not  arising  from  such  credits,  or  from  property 


320  HERTIG    ON    TAXATION. 

otherwise  taxed  in  this  state" — such  income  tax  to  be  "uniform 
throughout  the  state,"  and  to  be  levied  at  a  rate  "not  to  exceed 
ten  per  centum  upon  the  income  from  such  credits,  and  at  a  rate 
not  exceeding  four  per  centum  upon  such  other  income,"  The 
House  bill  as  to  income  tax  was  slightly  broader  than  the  Senate 
bill — the  House  aiming  at  a  tax  upon  the  income  from  all  credits 
and  all  personal  property  (these  two  together  in  the  not-to-exceed- 
ten-per-cent  class)  and  at  an  income  tax  not  exceeding  four  per 
cent,  on  the  income  not  arising  from  such  credits  and  personal 
property.  The  House  bill  also  authorized  "a  registry  tax  upon  all 
real  estate  mortgages  *  *  *  in  lieu  of  all  other  taxes  on  the 
debt  secured  by  such  mortgages."  Both  bills  guarded  their  in- 
come and  other  special  tax  features  from  becoming  oppressive, — 
the  Senate  bill  by  providing  "that  the  credits  above  described  shall 
not  be  subject  to  other  taxation  than  the  income  tax  herein  author- 
ized, while  the  law  imposing  such  income  tax  shall  be  in  force" ; 
the  House  bill  by  providing  "that  the  credits  and  personal  prop- 
erty above  described  shall  not  be  subject  to  other  taxation  than 
the  income  or  registry  tax  herein  authorized,  while  the  law  im- 
posing such  income  or  registry  tax  shall  be  in  force." 

Both  bills  retained  section  3  of  article  IX.  of  the  constitution 
except  that  they  raised  the  now  authorized  individual  exemption 
of  $200  to  $300,  but  limited  it  to  "one  member  of  the  same  fam- 
ily." They,  each,  retained  nearly  verbatim  the  first  sentence  of 
section  2  of  article  IX.  of  the  constitution,  relating  to  providing 
for  an  annual  tax  to  defray  the  ordinary  yearly  expenses  of  the 
state,  and  for  levying  a  tax  for  the  ensuing  year  to  pay  any  de- 
ficiency of  the  preceding  year.  Both  made  it  mandatory  on  the 
legislature  to  omit  the  annual  state  tax  levy,  "whenever  the  in- 
come of  the  state  from  other  sources  shall  be  sufficient  to  defray 
all  of  its  ordinary  expenses."  Each  guarded  against  caprice  on 
the  part  of  the  counties  by  providing  that  in  case  of  omitted  levy 
for  state  purposes,  the  taxes  for  local  purposes  "shall  be  upon  a 
valuation  of  the  property  within  the  several  counties  and  the  sub- 
divisions thereof,  which  shall  be  equalized  and  uniform  through- 
out each  county.1'  Both  bills  avoided  meddling  with  the  question  of 
railroad  taxation,  each  having  the  clause  that  "nothing  in  this  act 
contained  shall  be  construed  to  affect,  modify  or  repeal  any  law 
providing  for  the  taxation  of  the  gross  earnings  of  railroads." 

The  judiciary  committee  of  the  House  was  not  a  unit  on  its 
bill,  a  minority  favoring  amendments  which  would  throw  the  con- 
stitution "wide  open."  Scattering  amendments  offered  to  the  bill 
gave  occasion  to  show  the  disposition  of  the  House.  Its  leader? 
declared  for  a  wide-open  policy — the  sturdy  Jacobson,  to  the  as- 
tonishment of  many,  coming  out  in  favor  of  letting  down  the  bars. 


HERTIG    ON     TAXATION.  x  321 

Certain  amendments  to  the  bill  offered  by  Alley  (Rep.),  of  Wright 
county,  and  moving  toward  wide  open  result  were  adopted  by 
yeas  63,  nays  48.  Finally  Roberts  (Rep.),  of  Hennepin,  moved 
to  strike  out  all  of  the  bill  except  its  enacting  clause,  and  to  in- 
sert as  an  amendment  to  sections  I,  2.  and  3  of  article  IX.  of  the 
constitution,  the  following  lucid  condensation  of  the  wide-open 
points,  to  be  known  and  cited,  after  adoption,  as  section  one  of 
said  article  IX.: 

"The  power  of  taxation  shall  never  be  surrendered,  suspended 
or  contracted  away,  and  all  taxes  shall  be  uniform  upon  the  same 
class  of  subjects  and  shall  be  levied  and  collected  under  general 
laws  for  public  purposes,  but  public  burying  grounds  [etc.,  quot- 
ing the  positive  exemptions  as  given  in  sec.  2,  art.  IX.  of  the  con- 
stitution, but  for  "church  property  used  for  religious  purposes, 
and  houses  of  worship"  substituting  the  simpler  and  severer 
"church  property  used  exclusively  for  religious  purposes"]  and 
personal  property  to  an  amount  not  exceeding  three  hundred 
($300)  dollars  to  each  individual  shall  be  exempt  from  taxation, 
but  such  personal  exemption  shall  not  be  allowed  to  more  than  one 
member  of  the  same  family ;  provided  that  nothing  herein  con- 
tained shall  be  construed  to  affect,  modify  or  repeal  any  law  pro- 
viding for  the  taxation  of  the  gross  earnings  of  railroads." 

On  March  6th,  "the  amendment  offered  by  Mr.  Roberts,  being 
in  its  nature  a  substitute  for  H.  F.  55,  was  *  *  *  adopted 
upon  motion  of  Mr.  Roberts." — Journal  of  the  House,  March  6, 
1902.  The  bill,  as  so  amended,  "was  then  read  for  the  third  time 
and  put  upon  its  final  passage.  *  *  *  And  the  roll  being 
called  there  were  yeas  65  and  nays  45.  *  *  *  So  the  bill 
passed  and  its  title  was  agreed  to." — Id. 

Of  the  65  yea  votes  50  were  Republican  and  15  non-Republi- 
can ;  of  the  45  nays  38  were  Republican  and  7  non-Republican. 
Of  these  7  nays,  5  were  Democrat  and  2  Populist.  Counting  the 
Fusionists  or  those  officially  listed  as  "Demo.-Peop."  (three  in 
all)  with  the  Populists  there  was  a  vote  of  7  Populists  for  to  2 
Populists  against  the  bill.  Leaving  out  the  Fusionists  there  were 
4  Populists  for  to  2  against.  Of  "straight"  Democrats  8  were 
for  and  5  against  the  bill.  Counting  the  three  Fusionists  as 
Democrats,  the  Democrat  vote  was  n  for  to  5  against  the  bill. 
This  vote,  too,  is  in  line  with  the  other  votes  whose  analysis  I  have 
given  :  all  show  that  there  is  an  increasing  number  of  important 
questions  not  yet  invaded  and  covered  by  party  politics. 

On  the  same  day  (March  6th)  the  Senate  reached  its  own 
bill  for  constitution'5!  amendments  (S.  F.  90),  and  debated  the 
features  thereof  in  committee  of  the  whole.  An  amendment  of- 
fered by  Horton  (Rep.),  of  Ramsey,  making  the  gross  earnings 


822  HERTIG    ON     TAXATION. 

tax  the  sole  tax  on  public  service  corporations, — such  tax  to  be 
apportioned  in  distribution  between  state,  county  and  other  sub- 
divisions as  other  taxes  are,  and  to  be  exclusive  of  all  other  taxes 
and  special  assessments,  was  voted  down,  as  was  also  a  somewhat 
similar  amendment  offered  by  Sheehan  (Rep.),  of  Ramsey.  Va- 
rious other  senators  criticised  special  features  of  the  bill ;  but 
when  it  was  put  upon  its  passage,  all  the  senators  present  (53) 
voted  for  it,  including  those  who  had  offered  amendment  and 
those  who  had  otherwise  criticised.  Of  the  10  senators  absent 
or  not  voting,  4  were  Republicans,  and  6  Democrats  and  Popu- 
lists. 

The  difference  in  the  views  of  House  and  Senate  as  evidenced 
by  the  constitutional  amendments  separately  approved  by  each  in 
its  respective  bill  as  passed,  necessitated  the  appointment  by  each 
of  a  "conference  committee,"  to  remove,  if  possible,  the  differ- 
ences in  evidence.  The  two  committees  met  and  came  to  an  agree- 
ment. They  had  to  agree  more  than  once  on  account  of  some  pro- 
vision respectively  agreed  to  proving  distasteful  to  one  branch  or 
the  other  of  the  legislature.  An  agreement  which  both  branches 
were  willing  to  concur  in  was  not  reached  until  the  last  active 
day  of  the  session;  and  it  seemed  probable  enough  until  final  ac- 
tion had  been  actually  taken  that  no  bill  for  constitutional  amend- 
ments would  be  passed.  The  chief  bone  of  contention  was  the 
franchise  tax.  Stockwell  (Demo.-Pop.),  of  Hennepin,  opposed  in 
the  Senate  to  the  last  any  bill  for  amendments  to  the  constitution 
except  that  which  had  been  drafted  and  proposed  by  the  tax  com- 
mission (see  p.  303  above),  but  he  stood  practically  alone  in  al- 
legiance to  the  commission's  bill.  Horton  (Rep.),  of  Ramsey,  in- 
sisted, in  the  Senate,  that  franchise  or  gross  earnings  taxes  should 
be  "in  lieu  of  all  other  taxes  except  real  estate  taxes  for  local  im- 
provements." He  criticised  the  franchise  tax  provisions  of  the 
bill  (which  finally  passed  both  houses)  as  too  restrictive,  as  mean- 
ingless in  part,  and  as  contrary  throughout  to  the  spirit  of  real 
tax  reform.  The  House  on  March  8th,  was  in  somewhat  of  an 
uproar.  Dunn  (Rep.),  of  Hennepin,  taking  the  floor  said  that 
in  some  mysterious  manner  the  report  of  the  conference  commit- 
tee had  been  changed ;  that  in  the  exemption  clause  the  word 
"public"  had  been  left  out  where  it  precedes  "property"  in  the 
constitutional  phrase,  "and  public  property  used  exclusively  for 
public  purposes  shall  be  exempt  from  taxation."  J.  A.  Peter- 
son (Rep.),  of  Hennepin,  announced  that  he  would  offer  an 
amendment  to  the  report  of  the  conference  committee  to  the  ef- 
fect that  a  general  income  tax  be  levied  on  all  personal  property 
over  $1,000.  Such  were  some  of  the  matters  that  contributed  to 
postpone  final  agreement  until  the  last  active  day  of  the  session. 


HERTIG    ON    TAXATION.  323 

A  joint  resolution  had  already  been  passed  to  adjourn  on  March 
nth.  No  bill  can  be  passed  on  the  last  day  of  a  session.  The 
9th  of  March  fell  on  Sunday ;  hence  Saturday's  continuing  dis- 
agreement meant  a  squeeze  through  on  the  last  active  day  (Mon- 
day, March  loth),  or  it  meant  no  constitutional  amendments. 
Bingham,  of  the  Duluth  Herald,  described  Saturday's  peril  in  his 
usual  piquant  way,  and  I  quote  the  description  as  typical  of  the 
haste  and  the  uncertain  fate  which  generally  attend  important 
measures  in  the  last  days  of  American  legislative  sessions. 

"The  constitutional  amendments  got  into  a  perilous  condition  Satur- 
day afternoon.  Just  when  everything  looked  lovely,  and  the  conference 
committee  had  agreed,  and  the  senate  had  passed  the  bill  agreed  upon, 
the  house  tackled  the  bill  and  made  some  changes  in  it.  This  necessi- 
tated its  going  back  to  the  conference  committee,  and  to  the  senate  again. 
Then  ensued  a  game  of  battledore  and  shuttlecock,  with  the  bill  as  the 
shuttlecock.  After  the  conference  committee  had  agreed  again,  Senator 
Young  and  J.  F.  Jacobson,  of  the  committee,  stuck  in  some  words  that 
were  intended,  they  said,  to  be  explanatory.  They  provided  that  the 
franchise  tax  should  be  in  addition  to  all  other  taxes.  This  has  been 
understood,  but  not  expressed.  When  the  senate  found  that  this  change 
had  been  made  there  was  a  fight  on  it,  and  its  consideration  was  put  over 
to  today.  This  was  looked  upon  by  many  of  the  "friends  of  the  bill," 
meaning  those  who  have  worked  for  the  various  tax  bills  that  have  gone 
in,  as  meaning  the  defeat  of  the  bill." 

At  last,  in  the  afternoon  of  March  loth,  a  final  report  of  the 
conference  committee  was  laid  before  both  houses.  Doubtless 
that  there  might  be  neither  opportunity  for  clerical  error  nor 
charge  of  tampering,  the  committee  brought  in  an  amendment 
practically  in  the  form  of  a  new  bill,  to  be  substituted  for  the  bill 
as  previously  amended  on  first  striking  out  all  of  the  enacting 
clause.  The  report,  less  the  bill,  or  "amendment, "  attached  there- 
to was  in  these  words : 

"The  committee  on  conference  to  whom  was  referred  H.  F. 
55  as  the  same  had  been  amended  and  passed  by  the  Senate,  re- 
spectfully report  an  amendment  to  said  bill  which  is  hereto  at- 
tached, and  recommend  that  when  so  amended,  said  bill  do  pass. 
E.  T.  Young,  J.  T.  Alley, 

Geo.  P.  Wilson,  W.  B.  Anderson, 

Enos  Thompson,  J.  F.  Jacobson,    • 

G.  W.  Somerville,  Carl  Wallace, 

A.  Schaller,  E.  A.  Whitford, 

Committee  on  part  of  Senate.      Committee  on  part  of  House." 

Of  the  gentlemen  serving  on  the  committee,  Schaller  was  the 
only  Democrat. 

The  Senate  concurred  in  the  report,  after  a  short  debate  in 
which  Horton  and  Stockwell  urged  their  respective  views  and 
amendments  already  mentioned,  and  Young  and  Thompson  de- 
fended the  bill.  The  test  of  strength  came  on  putting  to  vote  the 


324  HERTIG    ON    TAXATION. 

question  of  concurring  in  the  report.  The  vote  for  concurring 
was  38  yeas  as  against  20  nays.  "So  the  report  was  concurred  in 
and  the"  amendments  were  adopted."  The  bill  was  then  put  -on 
its  passage,  and  the  vote  showed  that  now  that  there  was  no  fur- 
ther opportunity  for  a  different  bill,  some  of  the  senators  who 
voted  against  concurring  preferred  to  put  themselves  on  record 
as  favoring  this  bill  in  preference  to  none.  The  vote  on  its  pas- 
sage was  yeas  46,  nays  n.  Buckman  (Rep.),  Dickey  (Rep.), 
Hawkins  (Rep.),  Hospes  (Rep.),  Me  Arthur  (Rep.),  Reeves 
(Rep.),  Ryder  (Rep.),  who  voted  against  concurring  voted  yea 
on  the  passage  of  the  bill.  Ives  and  Sivright  who  voted  against 
concurring  did  not  vote  at  all  on  the  passage.  Those  who  voted 
nay,  both  as  to  concurring  and  as  to  passage,  were  Dart  (Dem.), 
Greer  (Rep.),  Morton  (Rep.),  McGowan  (Dem.),  Nixon 
(Rep.),  Potter  (Rep.),  Sheehan  (Rep.),  E.  E.  Smith  (Rep.,,  J. 
H.  Smith  (Rep.),  Stockton  (Rep.),  and  Stock  well  (Demo.-Pop.). 
Of  the  38  who  voted  for  concurring,  there  were  1 1  Democrats 
and  2  Populists. 

The  House  concurred  with  a  rush,  and  when  immediately  af- 
terwards the  bill  was  put  on  its  passage,  the  vote-  was  yeas  99  and 
nays  3.  Butler  (Dem.),  Herbert  (Dem.)  and  Phillips  (Rep.), 
cast  the  nay  votes.  So  the  bill  passed  the  House  with  the  hearty 
consent  of  all  parties. 

The  bill  so  passed  was  duly  approved  by  the  Governor.  Its 
text  is  as  follows, — the  words  in  black  letters  being  already  in  the 
constitution,  and  forming  a  part  of  the  sections  sought  to  be 
amended,  while  the  words  in  brackets  are  mine  to  point  out  cer- 
tain differences  .between  the  bill  and  the  constitution : 

Section  1.  The  power  of  taxation  shall  never  be  surrendered,  suspended 
or  contracted  away.  The  legislature  shall  provide  for  an  annual  tax  sufficient 
to  defray  the  estimated  ordinary  expenses  of  tha  state  for  each  year  and 
whenever  it  shall  happen  that  such  ordinary  expenses  '  :  for  any  year 

shall  exceed  the  income  of  the  state  for  such  year  the  legislature  shall  at 
its  next  general  session  provide  for  levying  a  tax  =  sufficient  to  p:sy 

such  deficiency.  And  whenever  the  income  of  the  state  from  other  sources 
shall  be  sufficient  to  defray  all  of  its  ordinary  expenses  without  the  levy 
of  any  annual  state  tax,  such  tax  levy  shall  lie  omitted.  All  taxes  to  b-i 
raised  in  this  state  shall  be  as  nearly  equal  rs  may  be,  and  shall  be  It >\  i.  d 
and  collected  for  public  purposes  only;  and  all  property  on  which  taxes  are 
to  be  levied,  except  as  herein  otherwise  provided,  shall  hn^e  a  cash  valua- 
tion, and  shall  be  equalized  and  uniform  throughout  the  state;  provided  tbat 
whenever  the  levy  of  a  tax  for'  state  purposes  is  omitted  as  above  provided. 
the  taxes  levied  for  local  purposes  shall  be  upon  a  valuation  of  the  property 
within  the  several  counties  and  the  subdivisions  thereof  which  shall  be 
equalized  and  uniform  throughout  each  county.  The  legislature  rnay  by  gen- 
eral or  special  law  [present  constitution:  "by  general  law  or  special  act"]  au- 
thorize municipal  corporations  to  levy  assessments  for  local  improvements 
upon  the  property  fronting  upon  such  improvements,  or  upon  property  bene- 
fited thereby  [present  constitution:  '  upon-  the  property  to  be  benefited  by 
such  improvements"]-  or  both,  without  regard  to  a  cash  valuation  in  such 
manner  as  the  legislature  may  prescribe.  There  may  be  levied  and  collected 
an  annual  tax  upon  franchises  granted  by  public  authority,  in  addition  to 
the  tax  on  the  real  property  and  other  personal  property  of  the  person  or 
corporation  holding  such  franchise;  or  in  lieu  of  a  tax  on  such  franchise 
alone,  or  in  lieu  of  a  tax  on  such  franchise  and  the  personal  property  used 


HERTIG  ON  TAXATION.  325 

in  connection  with  the  exercise  of  the  same,  there  may  be  imposed  such  tax 
upon  the  gross  earnings  of  the  person  or  corporation  holding  such  franchise 
as  the  legislature  may  determine;  and  said  tax  shall  be  apportioned  between 
the  state,  counties  and  municipalities  where  such  franchise  is  exercised,  in 
the  same  manner  as  real  estate  taxes  are  apportioned.  There  may  be  levied 
and  collected  a  transfer  tax  not  to  exceed  five  per  centum  upon  the  estates  of 
decedents,  above  a  fixed  and  specified  siun,  which  tax  may  be  uniform  or 
graded  or  progressive.  [Present  constitution:  "there  may  be  by  law  levied 
and 'collected  a  tax  upon  all  inheritances,  devises,  bequests,  legacies,  and 
gifts  of  every  kind  and  description  above  a  fixed  and  specified  sum,  of  any 
and  all  natural  persons  and  corporations."]  There  may  be  levied  and  col- 
lected a  registry  tax  upon  all  real  estate  mortgages  which  shall  be  in  lieu 
of  all  other  taxes  on  the  debt  secured  by  such  mortgages;  and  a  tax  upon 
the  income  from  all  credits  owned  by  persons  or  corporations,  as  such  credits 
are  now  or  may  be  hereafter  defined  by  law,  and  also  on  the  income  arising 
fiom  all  personal  property,  and  also  upon  the  income  of  all  persons  or  corpo- 
rations above  the  sum  of  one  thousand  dollars  per  annum,  not  arising  from 
such  credits  or  from  such  personal  property,  or  from  property  otherwise 
taxed  in  this  state.  Such  income  tax  shall  be  uniform  throughout  the  stace 
and  may  be  graded  or  progressive  or  both,  and  shall  be  levied  at  a  rate  not 
to  exceed  ten  per  centum  upon  the  income  from  such  credits,  and  upon  the 
income  fiom  personal  property,  and  at  a  rate  not  exceeding  four  per  centum 
upon  such  other  income.  Laws  shall  be  passed  taxing  all  ! 

real  and  personal  property;-  provided  that  credits  and  personal  property  shall 
not  be  subject  to  other  taxation  than  the  income  or  registry  tax  herein  au- 
thorized, while  the  law  imposing  such  income  or  registry  tax  shall  be  in 
force;  provided,  public  burying  grounds,  public  schools,  public  hospitals,  public 
library  associations,  *  *  *  colleges,  universities  and  all  seminaries  of 
learning,  all  churches  and  church  property  used  exclusively  for  religious  pur- 
poses and  institutions  of  purely  public  charity,  and  public  property  used  ex- 
clusively for  *  *  public  purposes,  and  personal  property  to  an  amount 
not  exceeding,  *  *  three  hundred  dollars  to  each  individual  shall 
'f  be  exempt  from  taxation,  but  such  personal  exemption  shall  not  be 
allowed  to  more  than  one  m amber  of  the  same  family.  [Present  constitution 
exempts  "personal  property  to  an  amount  not  exceeding  in  value  two  hun- 
dred dollars  for  each  individual"  but  does  not,  like  the  proposed  amend- 
ment, limit  the  exemption  to  "one  member  of  the  same  family."]  Provided, 
further,  that  nothing  in  this  act  contained  shall  be  construed  to  affect,  modify 
or  repeal  any  law  providing  for  the  taxation  of  the  gross  earnings  of  rail- 
roads. 

W.  B.  Douglas,  attorney  general,  has  officially  summarized 
the  effect  of  the  fore^oin°f  amendment  in  case  of  its  adoption. 
The  most  important  Dart  of  his  summary,  as  directing  attention 
to  those  features  of  the  amendment  on  which  interest  will  centre, 
are  pam^-anhs  4-8  inclusive.  I  therefore  quote  them  in  full : 

"4.  The  legislature  is  authorized  to  provide  for  the  levy  and  collec- 
tion of  an  annual  tax  upon  franchises  granted  by  public  authority,  in  ad^i- 
tion  to  the  tax  on  real  and  personal  property  of  the  person  or  corporation 
holding  the  same. 

"5.  The  legislature  is  authorized  to  provide  a  tax  upon  the  gross  earn- 
ings of  any  person  or  corporation  holding  such  franchise,  conditioned  that 
such  gross  earnings  tax  may  be  in  lieu  of  a  tax  upon  the  franchise,  or 
upon  the  franchise  and  personal  property  as  well. 

"6.  Authority  is  conferred  upon  the  legislature  to  provide  for  the 
levy  and  collection  of  a  registry  tax  upon  all  real  estate  mortgages,  which 
shall  be  in  lieu  of  all  other  tax  upon  the  debt  secured  by  such  mortgage. 

"7-  The  legislature  is  authorized  to  provide  for  a  tax  upon  incomes 
in  excess  of  $1,000  per  annum  not  arising  from  credits  or  personal  prop- 
erty, or  from  property  otherwise  taxed  in  this  state,  and  also  a  tax  upon 
the  income  derived  from  credits  as  well  as  from  personal  property.  Such 
tax  shall  be  uniform  throughout  the  state,  and  may  be  graded  or  progres- 
sive, or  both,  and  shall  be  levied  at  a  rate  not  to  exceed  10  per  centum 
upon  incomes  derived  from  credits  and  personal  property,  and  at  a  rate 
not  exceeding  4  per  cent  per  annum  upon  such  other  incomes.  In  case 
of  the  imposition  of  the  registry  tax  above  referred  to,  or  of  an  income  tax 


326  HERTIG    ON    TAXATION. 

arising  from  credits  or  personal  property,  all  credits  and  personal  property 
owned  by  the  party  against  whom  such  registry  or  income  tax  is  imposed 
are  exempt  from  all  taxation  while  the  law  imposing  such  income  or 
registry  tax  is  in  force. 

"In  other  words,  where  an  income  tax  upon  salaries  or  earnings  of 
individuals  is  provided  for,  all  personal  property  and  credits  must  still 
be  subjected  to  taxation,  while  in  case  of  the  imposition  of  an  income 
tax  arising  from  credits  and  personal  property,  or  of  a  registry  tax,  such 
credits  and  personal  property  are  exempted  from  taxation. 

"8.  The  legislature  is  authorized  to  exempt  personal  property  of  each 
individual  to  the  extent  of  $300,  provided  the  same  shall  not  apply  01 
be  allowed  to  more  than  one  member  of  the  same  family." 

The  Attorney  General  bluntly  stated  the  effect  of  the  amend- 
ment according  to  its  apparent  literal  meaning;  he  judiciously  re- 
frained from  raising  those  technical  points  which  would  only  con- 
fuse the  voters  for  whose  information  the  law  requires  him  to 
make  his  summary.  The  method  of  taxing  public-service  corpor- 
ations by  taking  a  percentage  of  their  gross  earnings  has  much 
to  commend  it.  While  taxing  the  net  earnings  is  theoretically  the 
better  way,  taxing  the  gross  earnings  is  the  surer  and  the  more 
convenient  way.  Besides,  if  a  gross-earnings  tax  be  discreetly 
graded,  it  is  an  eminently  just  tax.  But  all  lies  in  the  grading: 
to  tax  a  local  street-car  system  in  a  small  town,  where,  for  in- 
stance, the  gross  earnings  are  less  than  $2,000  per  mile  of  line, — 
tax  it  at  the  same  percentage  of  its  gross  earnings  as  you  would 
tax  systems  in  .large  cities  earning,  like  the  Twin  City  Company 
in  St.  Paul  and  Minneapolis,  $12,500  gross  per  mile,  or  like  the 
Metropolitan  in  New  York,  $75,000  per  mile  of  track, — would 
mean  either  confiscation  for  the  small-city  system,  or  unjustly  low 
taxation  for  the  large-city  system.  Gross  earnings  taxes,  then, 
should  be  wisely  graded  and  classified.  Would  the  amendment 
authorize  the  legislature  to  classify  the  public-service  companies, 
and  vary  the  percentage  of  the  earnings  tax  according  to  the 
classification  ?  It  does  not  on  its  face  so  authorize ;  but  it  con- 
tains the  words,  "all  property  on  which  taxes  are  to  be  levied,  ex- 
cept as  herein  otherwise  provided,  shall  have  a  cash  valuation, 
and  shall  be  equalized  and  uniform  throughout  the  state."  The 
amendment,  then,  does  later  "otherwise  provide"  for  taxing  cer- 
tain properties, — otherwise  than  by  a  rate  on  "a  cash  valuation." 
Franchises  are  not,  in  express  words,  authorized  to  be  taxed 
otherwise  than  according  to  their  cash  valuation ;  whether  by  im- 
plication such  authorization  is  given  I  need  not  discuss.  I  con- 
ceive, however,  that  the  right,  which  the  amendment  clearly  gives 
to  the  legislature  to  commute  the  tax  on  franchises  and  on  "per- 
sonal property  used  in  connection  with  the  exercise  of  the  same" 
into  a .  gross-earnings  tax — carries  with  it,  beyond  a  reasonable 
judicial  doubt,  the  further  right  to  classify  the  gross-earnings 


HERTIG    ON    TAXATION.  327 

tax,  and  hence  to  fix  different  rates  of  the  same  according  to  the 
varying  abilities  of  the  persons  and  corporations  to  which  it  may 
be  applied.  For,  if  the  commutation  is  based  upon  valuation  of 
the  personal  property  and  of  the  franchise  taken  together,  then 
there  can  be  no  equality  and  uniformity  of  taxation  either  in  the 
ordinary  or  in  the  proper  technical  meaning  of  equality  and  uni- 
formity, unless  the  rate  of  the  gross-earnings  tax  is  made  to  vary 
by  an  equitable  classification.  And  should  it  be  thought  that  by 
implication  the  discretion  of  the  legislature  is  not  limited  by  the 
primary  basis  of  valuation,  its  discretion  to  classify  the  gross- 
earnings  tax  into  different  rates  for  varying  abilities,  is  equally, 
or  even  more  strikingly,  apparent, — subject  always  to  the  limita- 
tion that  the  gross-earnings  tax  must  be  at  a  uniform  rate  in  and 
for  each  classification.  With  this  interpretation,  which  I  doubt 
not  will  be  judicially  sanctioned,  the  amendment  becomes  a  bet- 
ter piece  of  legislative  work  than  it  would  generally,  on  first  read- 
ing, seem  to  be.  It  would  be  still  better  if  it  did  not  limit  to  five 
per  cent,  the  "transfer  tax"  which  it  authorizes  "upon  the  estates 
of  decedents."  But  the  taxation  of  such  estates  is  in  its  infancy 
in  Minnesota;  and  objection  to  the  rate,  as  limited  in  the  amend- 
ment, should  not  cause  any  one  to  vote  against  its  adoption.  The 
authorization  of  a  registry  fee  on  mortgages  "in  lieu  of  all  other 
taxes  on  the  debt  secured  by  such  mortgages" — is  a  good  feature. 
Such  registry  fee,  when  the  legislature  shall  fix  it,  should  be 
made  low,  so  as  to  discourage  neither  lending  nor  borrowing, 
a~hd  especially  so  as  not  to  encourage  evasion.  It  will  then  be  a 
new  and  considerable  source  of  revenue,  and  will  work  no  injury. 
The  income-tax  features  of  the  amendment  are  not  free  from 
technical  difficulties  and  close  questions.  But  income  taxation 
is  the  only  proper  basis  of  taxation;  and,  as  I  have  stated  in  vari- 
ous forms  throughout  this  book,  is  the  real,  if  not  the  nominal, 
basis  of  all  direct  taxes  that  last,  or  remain  operative,  through  a 
considerable  period  of  time.  The  general' property  tax  does  not 
reach  "credits"  and  other  invisible  property,  largely  because  it 
would  confiscate  if  it  should  so  reach.  The  theory  of  income  taxa- 
tion may  be  separated  from  the  art  of  income-tax  collection;  and 
they  are  necessarily  separated  in  the  proposed  amendment,  and 
should  be  kept  separate  in  the  minds  of  voters.  That  is  to  say, 
it  could  not  have  been  made  any  part  of  the  amendment  to  an- 
ticipate and  provide  for  the  problems  of  income-tax  collection. 
It  is  a  distinct  advance  in  taxation  for  Minnesota  to  aim  at  tax- 
ing incomes;  and  improved  theory  therein  and  the  practical  art 
of  collection  will  come  with  experience.  That  the  income-tax 
authorized  by  the  amendment  "may  be  graded  or  progressive  or 
both"  is  a  feature  in  line  with  advanced  ideas  in  taxation.  It  is 


328  HERTIG    ON    TAXATION. 

but  natural  justice  that  the  man  with  an  income  of  $5,000.00 
should  pay  more  than  five  times  as  much  income  tax  as  the  man 
with  only  an  income  of  $1,000.00.  The  voters  of  Minnesota 
should  adopt  the  amendment. 

In  close  connection  with  the  foregoing  amendment  should 
be  considered  the  act  of  April  6,  1901  (laws  of  1901,  ch.  150), 
commonly  called  the  Jacobson  gross-earnings  act,  and  mentioned 
in  a  previous  chapter  of  this  work,  as  passed  with  a  view  to  raise 
the  tax  on  gross  earnings  of  railroads  from  three  per  cent,  to 
four.  This  act  with  the  foregoing  amendment  to  the  constitu- 
tion, and  certain  other  amendments  of  minor  importance, — will 
afford  the  voters  of  Minnesota  an  occasion  to  practice  the  ref- 
erendum at  the  general  election  of  1902.  The  people  of  the 
United  States,  that  is  to  say  those  living  in  the  states,  are  suf- 
ficiently familiar  with  the  referendum  as  a  pait  of  the  usual  pro- 
cess in  adopting  or  amending  state  constitutions.  The  Jacob- 
son  gross-earnings  act  is  submitted  to  the  people  under  section 
32a  of  art.  III.  of  the  state  constitution,  which  section  provides, 
in  substance,  that  any  change  in  the  present  gross-earnings  tax, 
whether  by  repeal  or  amendment,  shall  before  taking  effect  "be 
adopted  and  ratified  by  a  majority  of  the  electors  of  the  state  vot- 
ing at  the  election  at  which  the  same  shall  be  submitted  to 
them."  One  defect  of  the  Jacobson  act,  for  believers  in  compe- 
tition, is  that  it  does  not  perpetuate  the  present  discrimination  in 
favor  of  new  railroads,  whereby  they  pay  an  annual  gross-earn- 
ings tax  of  one  per  cent,  for  the  first  three  years  and  two  per 
cent,  for  the  succeeding  seven  years.  It  is  a  curious  fact,  when 
one  comes  to  examine  it  closely,  that  most  of  the  recent  tax  leg- 
islation pertaining  to  corporations  tends  to  confirm  and  strength- 
en monopolies  and  trusts.  They  are  entrenched  both  in  strength 
to  pay  and  in  facilities  for  evading  new  taxes;  fresh  capital  and 
capital  in  moderate  amounts  are  proportionately  discouraged. 
With  reference  to  the  Jacobson  law,  it  is  as  if  its  friends  had  said 
to  the  railroads  in  Minnesota:  "We  give  it  up;  there  will  be  no 
new  railroad  enterprises  in. Minnesota.  You  will  doubtless  keep 
them  out  anyway;  and  so  we  are  willing  to  strengthen  your 
monopoly,  if  you  will  pay  the  state  one  per  cent.  more.  For  that 
additional  one  per  cent  we  agree  to  begin  taxing  new  railroads 
off  the  earth  before  their  last  spilce  gets  cold."  The  real  signifi- 
cance of  the  fact  that  so  much  new  tax  legislation  tends  strik- 
ingly to  favor  monopolies  is  that  it  is  a  virtual  abandonment  of 
the  principle  of  competition,  and  therefore  is  an  unconscious  step 
towards  closer  state  control  and  increased  paternalism. 

The  most  current  objection  to  the  Jacobson  act  is  its  doubtful 
constitutionalitv.  There  would  seem,  however,  to  be  no  doubt  of 


HERTIG    ON     TAXATION.  329 

its  entire  validity  in  its  application  to  railroads  not  operated  un- 
der those  old  franchises  mentioned  in  Chapter  IX  of  this  work, 
which  carry  a  "contract"  for  exemption  from  any  other  tax  than 
an  annual  three  per  cent,  on  gross  earnings.  There  is  also  a 
"fighting  chance"  that  it  would  be  held  constitutional  by  the  su- 
preme court  of  the  United  States  on  the  grounds  mentioned  in 
the  same  chapter  in  connection  with  my  examination  of  cases 
there  cited.  No  doubt  the  railroads  will  contest  its  validity. 
Perhaps  they  would  not  seriously  object  if  they  could  count  on 
four  per  cent,  as  a  finality;  but  they  have  the  fresh  example  of 
Wisconsin  before  their  eyes  to  show  that  when  a  state  has  had 
four  per  cent,  for  a  while,  the  next  step  is  to  ask  five  and  a  half. 
In  fine,  while  the  state  of  Minnesota  is  not  putting  forth  her 
tax  issue  with  the  railroads  on  the  best  possible  lines,  and  is  tol- 
erably sure  to  meet  with  trouble  and  embarrassment  in  certain 
stages  of  the  contest, — she  can  better  afford  to  press  it  along  the 
Jacobson  lines  than  not  to  press  it  at  all;  the  three  per  cent  "con- 
tract" yoke  seemingly  riveted  on  her  by  federal  decisions  must 
be  broken ;  new  resources  to  that  end  will  be  enlisted  in  making 
persistent  attempt.  Minnesota,  however,  has  a  distinct  advan- 
tage in  clinging  to  the  gross-earnings  plan  and  to  the  consti- 
tutional plank  that  neither  the  plan  nor  the  rate  can  be  changed 
without  a  referendum  to  the  people.  Where,  as  in  some  of  the 
states,  the  railroads  are  annually  assessed  by  a  central  board  or 
otherwise,  there  is  each  year  an  exasperating  contest  over  the 
railroad  assessment.  There  is  the  temptation  to  use,  and  the 
suspicion  of  having  yielded  to,  undue  influence;  there  is  the  op- 
portunity and  the  temptation  to  pose  by  ostentatious  "tail-twist- 
ing;" there  is  discouragement  to  the  better  type  of  politician  in 
the  thought  that  it  may  be  hardly  worth  while  to  antagonize  the 
railroads  to  his  personal  fortunes,  when  a  more  pliable  board 
may  next  year  undo  a  proper  assessment. 


CHAPTER  XVIII. 


The  boom  and  decadence  of  Ricardo's  and  Mill's  Political  Economy — 
Professors,  salaries  and  self-conceit — Induction  and  deduction — Fields 
that  grow  spurious  metaphysics — General  refusal  by  professors  and 
others  to  stand  by  the  old  economy,  after  the  German  socialists  and 
Henry  George  had  built  upon  it — The  author's  still  lingering  fond- 
ness for  Ricardo — Delicious  irony  of  Providence  that  a  Philistine 
Bible  should  now  rend  the  Philistine  heart — E.  L.  Godkin  scores  the 
new  economy — Publication  and  boom  of  "Progress  and  Poverty"— 
Henry  George,  like  Schopenhauer,  complains  of  the  professors — Ric- 
ardian  rent  as  George's  basis — Theory  of  said  rent  too  abstract  for 
practical  utility — The  single  tax  in  its  hopes  for  reform — Bare  land  as 
a  metaphysical  entity — Suppose  the  single  tax  to  be  in  force! — Aus- 
tralian colonies  and  New  Zealand  by  no  means  accept  single  tax — 
Whom  exemption  of  improvements  favors — Single  tax  not  new, 
although  independently  rediscovered  by  George — Voltaire  and  Proud- 
hon  as  critics  of  the  single  tax — Grimshaw,  of  Minneapolis,  scores  on 
it  with  ten  propositions — Author  reviews  Seligman's  review  of  the 
single  tax — Herein  of  its  fiscal,  political,  moral  and  economic  defects 
— Inherent  and  unescapable  self-contradiction  between  paternalism  and 
individualism  in  George's  scheme — Superior  practical  wisdom  of  New 
Zealanders — True  significance  of  the  single  tax  movement. 


About  the  beginning  of  the  last  quarter  of  the  iQth  century 
it  began  to  be  apparent  to  the  rank  and  file  of  such  men  as  felt 
some  interest  for  political  economy,  and  whose  reading  of  and 
about  it  was  mostly  in  English,  that  something  particular  was 
astir  in  that  field.  They  began  to  see  what  keener  men  saw  or 
suspected  before, — that  "classical"  political  economy  had  been 
served  with  notice  to  quit,  and  that  with  more  or  less  of  bad 
grace  it  was  obeying  or  about  to  obey.  From  1817  on,  Ricardo 
had  had  a  great  boom.  From  the  standpoint  of  the  English  phil- 
istine,  and  of  the  professor  who  toadies  to  him,  no  other  man  had 
such  a  certified  right  as  Ricardo  to  settle  disputed  questions  : 
He  had  made  a  fortune;  therefore,  who' so  competent  to  write  on 
the  production  and  distribution  of  wealth?  Robert  Torrens 
wrote  in  1821:  "With  respect  to  political  economy,  the  period 


HERTIG    ON    TAXATION.  331 

of  controversy  is  passing  away,  and  that  of  unanimity  rapidly 
approaching.  Twenty  years  hence  there  will  scarcely  exist  a 
doubt  respecting  any  of  its  fundamental  principles."  More  than 
twenty  years  passed,  and  De  Quincey,  writing  in  1844,  and  still 
extravagantly  praising  Ricardo,  found  it  necessary  to  explain 
why  "political  economy  does  not  advance,"  and  to  reinforce  Ri- 
cardo with  a  Logic  of  Political  Economy.  But  when,  in  1848, 
appeared  the  Principles  of  Political  Economy,  by  John  Stuart 
Mill,  this  work  coming  atop  of  Mill's  previously  published  Es- 
says on  Sonic  Unsettled  Questions  of  Political  Economy,  — was 
received  with  extravagant  applause,  and  for  a  time  it  seemed 
that  peace  in  political  economy  had  almost  come.  "To  many 
students  his  book  is  the  Alpha  and  Omega  of  political  economy; 
they  know  little  of  what  was  before,  and  imagine  little  which 
can  come  after  in  the  way  of  improvement." — BAGEHOT. 

Meanwhile,  the  "science"  or,  as  some  called  it,  the  "art"  of 
political  economy,  had  got  firmly  established — on  a  salaried 
basis.  Princes  and  despots,  philistines  and  duffers  beamed  on 
it  with  their  patronage.  It  was  certain,  and  best  of  all,  it  was 
"safe."  Theology  justified  the  ways  of  God  to  man;  political 
economy  justified  the  ways  of  government  to  man:  no  Titans 
more  should  menace  the  sky ;  no  more  revolutionists  make 
thrones  tremble.  "It  is  now  taught  wherever  knowledge  is  cher- 
ished," was  proclaimed  early  in  the  century;  "it  is  now  consid- 
ered as  forming  an  essential  part  of  the  education  of  princes," 
was  proudly  added.  And  yet,  reversing  Galileo,  it  did  not  move 
— in  any  free  orbital  sense.  Professor  Cairnes,  quoting  in  1856 
"the  unlucky  prophecy  of  Torrens,"  confessed  that  so  far  from 
"unanimity"  having  come  in  political  economy,  the  period  of 
controversy  seemed  "hardly  yet  to  have  begun" — controversy 
"not  merely  respecting  propositions  of  secondary  importance, 
*****  but  controversy  respecting  fundamental  princi- 
ples which  lie  at  the  root  of  its  reasonings,  and  which  were  re- 
garded as  settled  when  Colonel  Torrens  wrote." — The  Character 
and  Logical  Method  of  Political  Economy.  Henry  Dunning 
MacLeod,  bringing  out  his  Elements  of  'Political  Economy  in 
1857,  was  moved  to  do  so  because,  as  he  thought,  the  works  of 
Adam  Smith,  Ricardo,  and  Mill  "were  merely  a  chaos  of  confu- 
sion and  contradictions."  His  views  did  not  much  shake  classi- 
cal political  economy  among  English  readers,  though  he  made 
a  convert  of  Prof.  Perry,  him  of  the  already  quoted  naive  and 
scrappy  exchange  notion  of  taxation.  However,  Bastiat  in 
French  had  largely  anticipated  MacLeod  in  the  free-trade  wing 
of  economy;  and  the  German  economist,  Friedrich  List  (1798- 
1846),  was  beginning  to  be  heard  abroad,  especially  in  America, 


332  HERTIG    ON    TAXATION. 

as  warrant  for  a  protection  wing  of  the  same.  The  article  on  po- 
litical economy,  written  if  Henry  George  states  the  date  correct- 
ly, in  1861,  by  Henry  Carey  Baird,  and  appearing  in  the  Amer- 
ican Encyclopedia,  says  amongst  other  things  the  following: 
"The  progress  thus  far  made  in  political  economy  has  been  slow 
and  uncertain,  and  there  is  in  its  entire  range  hardly  a  doctrine 
or  even  the  definition  of  an  important  word  which  is  universally 
or  even  generally  accepted  beyond  dispute." 

But  about  the  middle  of  the  century,  political  economy  had 
its  proudest  strut.  Professors  and  salaries  had  multiplied.  Free- 
trade,  as  apprehended  in  England,  which  is  not  free-trade  at  all, 
but  a  customs  tariff  for  revenue,  and,  in  the  case  of  tobacco,  for 
protection  also — this  free-trade  was  insufferably  conceited  (a 
quality  it  has  not  yet  lost),  and  fancied  it  was  going  to  sweep  the 
world.  Of  this  middle-century  period  Cliff e  Leslie  says:  "A 
cavalry  officer  of  the  period  before  the  Crimean  war,  when  that 
branch  of  the  army  was  distinguished  by  the  glory  of  a  mustache, 
used  to  say  that  no  man  could  conceive  the  pitch  to  which  human 
conceit  could  soar  unless  he  had  served  in  a  light  dragoon  reg- 
iment. He  was,  however,  mistaken.  There  was  a  being  yet 
more  elate,  with  a  sense  of  superiority  over  his  fellow-creatures 
in  the  economist  who  had  Bastiat  at  his  fingers*  ends,  and  who 
looked  on  political  economy  as  a  weapon  by  which  he  could  dis- 
comfit political  adversaries,  and  on  free-trade  as  a  personal  tri- 
umph; though  he  had  as  much  claim  to  renown  for  it  as  a  pas- 
senger in  a  Cunard  steamer  to  the  fame  of  Columbus." — Polit- 
ical Economy  and  Sociology,  in  the  Fortnightly  Reviezu,  Janu- 
ary, 1879. 

It  should  be  added  here  that  classical  political  economy  was  in 
the  main  deductive,  though  much  may  be,  and  has  been,  said  to 
redeem  Adam  Smith  from  the  clog  of  such  category.  Deduction, 
in  general,  may  be  described  as  a  starting  with  a  cock-sure  glit- 
tering generality,  bearing  it  along,  and  trimming,  compressing  or 
expanding  the  real  world  to  fit  into  or  fill  out  that  generality. 
To  illustrate  by  a  comparison  frivolous  in  form,  but  pat  in  sub- 
stance, the  deductive  process  is  much  like  the  Irishman's  con- 
ception of  casting  a  cannon, — '"Take  a  hole,  and  pour  the  melted 
metal  around  it!"  Mathematics  is  deductive;  but  the  axioms, 
principles  or  generalities  with  which  that  science  starts,  are  not 
only  cock-sure  but  sure  in  fact,  unless  indeed  Euclid,  like 
Charles  I.,  his  Cromwell,  justly  found  his  Lobatchewski,  and 
unless — but  here  is  not  the  place  to  pursue  further  this  very  re- 
condite subject.  It  is  a  fatal,  an  irresistible,  tendency  of  the  av- 
erage professorial  mind  to  erect  an  abstraction — or  set  of  ab- 
stractions (ready-made  and  self  registering,  of  mixed  induction 


HERTIG    ON    TAXATION.  333 

and  abracadabra)  into  masterful  operative  things,  and  then  "by 
operose  deduction,"  as  Dr.  Johnson  would  have  said,  extend  the 
sway  of  these  abstractions  or  metaphysical  entities  into  a  com- 
plete despotism  over  the,  or  rather  over  their,  world,  which  they 
would  have  us  believe  is  also  ours.  As  one  of  the  professors 
admits,  "the  analytical  and  speculative  intellect  is  seldom  keenly 
alive  to  the  interest,  the  freshness,  and,  above  all,  the  exact  val- 
ues, of  concrete  facts." — FRANKLIN  HENRY  GIDDINGS,  Democ- 
racy and  Empire,  199.  In  short,  the  professorial  mind  instinc- 
tively knowing  that  it  would  be  swamped  with  detail,  tries  to  re- 
verse such  result  by  swamping  detail  in  professorial  generali- 
ties. Speculative  philosophy,  or  the  metaphysics  of  the  schools, 
affords  many  an  instance  of  this,  but  in  all  honesty — hardly  pre- 
tending to  do  otherwise.  Political  economy,  Shakespearian  crit- 
icism, and  other  fields  that  could  be  mentioned,  display  a  rank 
and  obscuring  growth  of  spurious  metaphysics,  wherein  that  in- 
competence which  offers  easy  carving  to  well-wielded  critical 
knife,  that  unconscious  metaphysical  encroachment  which  re- 
sembles stealthy  appropriation — are  strangely  and  often  ludi- 
crously mingled.  De  Quincey  with  whom  everything  revolved 
into  metaphysics,  and  who  said  so,  was  so  confident  that  the 
right  beginning  for  political  economy  is  to  begin  with  metaphys- 
ical abstractions,  that  he  made  bold  to  assert  there  is  no  other 
beginning. 

Induction,  which  is  the  polar  opposite  of  deduction,  consists, 
as  generally  apprehended,  in  drawing  a  general  conclusion  or 
judgment  from  what  has  been  observed  in  particular  facts,  or  in 
the  presentation  of  particular  phenomena.  Wood  in  water  al- 
ways swims,  is  a  good  example  of  an  induction,  because,  though 
it  sets  forth  a  proposition  that  is  not  true,  the  consideration  of 
it  sufficiently  shows  how  one  arrives  at  an  inductive  judgment; 
shows  also,  by  reason  of  its  untruth  in  this  case,  the  weak  side 
of  induction  resulting  from  the  liability  to  error  both  in  examina- 
tion of  the  particular  facts  and  in  making  a  general  conclusion 
from  an  insufficient  number  of  facts  examined.  The  underlying 
assumption  in  all  induction  is  that  Nature  is  uniform;  and  this 
assumption  may  be  regarded  as  itself  an  induction.  That  gold 
is  ductile,  malleable,  yellow,  melts  at  such  and  such  a  tempera- 
ture, is  just  so  many  times  as  heavy  as  its  own  bulk  of  water,  in 
very  thin  leaves  transmits  a  greenish  light,  dissolves  in  such  and 
such  acids,  crystallizes  in  octahedrons,  etc., — presents  a  set  or 
assemblage  of  the  uniformities  of  nature  which  we  confidently 
expect  to  be  exactly  present  in  all  gold,  in  exactly  like  degrees. 
No  metallurgist  in  determining  whether  or  not  a  given  substance 
is  gold,  thinks  of  testing  it  for  all  the  uniformities  which  are  in- 


334  HERTIG     ON     TAXATION. 

separably  associated  with  the  scientific  notion  of  'that  metal. 
Whatever  his  favorite  test  may  be,  it  is  not  likely  to  make  appar- 
ent more  than  two  or  three  of  the  many  uniformities  that  the 
given  substance  would  present  under  an  exhaustive  examination. 
The  induction  that  Nature  is  uniform,  is  made  in  effect  long 
before  it  is  made  in  form,  as  is  exemplified  in  the  saying  "A 
burnt  child  dreads  the  fire."  Now,  in  saying,  as  I  did  in  the  out- 
set of  this  paragraph,  that  induction,  as  generally  apprehended, 
consists  in  concluding  from  the  particular  to  the  general,  I  meant 
to  imply  that  it  need  not,  and,  as  some  think,  ought  not  to  be 
so  apprehended;  that,  aside  from  the  debatable  ground  o!  apo- 
dictic,  or  self-evident  certainty,  induction  is  better  apprehended 
as  concluding  from  particular  to  particular,  and  not  from  par- 
ticular to  general,  or,  as  some  ivould  say,  from  particular  to  uni- 
versal. In  other  words,  an  induction  should  be  accepted  under 
the  reservation  that  here  and  now  and  as  far  as  we  can  see,  the 
conclusion  it  sets  forth  is  true.  This  reservation  implies,  of 
course,  that  other  and  further  experience  may  modify,  or  even 
contradict,  a  proposition  arrived  at  by  induction.  Furthermore, 
the  propositions  or  generalizations  or  abstract  principles  with 
which  Ri  car  do's  or  any  system  of  deductive  political  economy 
sets  forth,  must  themselves  be  classified  as  inductions  and  very 
imperfect  inductions  at  that. '  Inductions  of  this  kind  are  fre- 
quently introduced  with  the  formula,  "everybody  knows,"  or  "it 
is  natural  to  suppose,"  etc.  Bagehot  for  instance,  did  not  hesi- 
tate to  take  the  universals,  or  abstract  principles  of  Ricardo, 
from  which  the  latter  had  deduced  his  political  economy,  and 
give  to  them  the  very  form  of  imperfect  or  one-sided  inductions 
by  limiting  them  strictly  to  the  "here  and  now"  of  England.  In- 
ductions, then,  either  of  the  conscious  and  laborious  kind,  or  of 
the  sort  that  finds  its  inductions  ready-made  and  usable  under 
the  formula,  "it  is  natural  to  suppose" — are  the  base  and  warrant 
for  all  deductive  systems,  and  furnish  forth  those  glittering  gen- 
eralities with  which  they  seek  to  conquer  their  worlds.  I  have 
no  objection  to  deduction  as  such,  and  I  have  clearly  enough  in- 
dicated" the  limitations  of  induction  to  show  that  however  neces- 
sary its  use,  caution  therein  is  no  less  necessary.  Induction  and 
deduction  are  to  our  reasoning  processes  much  like  the  right 
foot  and  the  left  foot  to  walking.  Indeed,  in  this  connection  and 
in  this  single  tax  chapter,  it  seems  peculiarly  appropriate  to 
quote  Henry  George:  "So  far  as  our  reason  is  concerned,  in- 
duction must  give  the  facts  on  which  we  may  proceed  to  deduc- 
tion. Deduction  can  safely  be  based  only  on  what  has  been  sup- 
plied to  the  reason  by  induction;  and  where  the  validity  of  this 
first  step  is  called  in  question,  must  apply  to  induction  for  proof. 


HERTIG    ON     TAXATION.  335 

Both  methods  are  proper  to  the  careful  investigation  that  we 
speak  of  as  scientific:  induction  in  its  preliminary  stages,  when  it 
is  groping  for  the  law  of  nature;  deduction  when  it  has  discov- 
ered that  law,  and  is  thus  able  to  proceed  by  a  short  cut  from  the 
general  to  the  particular,  without  any  further  need  for  the  more 
laborious  and,  so  to  speak,  uphill  method  of  induction,  except  it 
may  be  to  verify  its  conclusions." — The  Science  of  Political  Econ- 
omy, 95-6. 

The  wide  strokes  and  long  dashes  with  which  I  am  indicating 
the  decay  of  classical  political  economy  seem  to  require  for  prop- 
er balance  the  above  sketch  of  its,  and  generally  of  deductive  and 
inductive,  methods.  Perhaps  nothing  contributed  more  power- 
fully to  such  decay  than  the  playing  of  its  own  deductive  game 
by  the  Germans,  Rodbertus,  Lassalle  and  Marx,  and  the  Ameri- 
can, Henry  George,  to  unforeseen  and  unorthodox  ends.  But 
direct  attack  came  in  as  a  close  second.  The  very  powerful  and 
influential  British  Association  for  the  Advancement  of  Science 
has  an  "Economic  Section."  In  1876,  a  motion  was  made  with- 
in the  association  to  expel  the  Economic  Section  as  having  no 
place  in  a  scientific  body;  and,  while  the  motion  did  not  prevail, 
it  was  almost  as  effective  with  the  reading  public  as  if  it  had  pre- 
vailed. In  1878,  Ingram,  the  president  of  the  same  Economic 
Section,  had  at  it  with  a  cut  equally  unkind,  bluntly  denied  to 
political  economy  any  standing  as  a  science,  and  gave  articulate 
and  general  voice  to  what  had  been  rather  a  scattered  than  a 
general  consciousness, — that  "there  is  a  general  opinion  among 
those  who  still  profess  to  think  highly  of  the  science  that  it  has 
seen  its  best  days;"  that,  in  short,  "political  economy  is  compre- 
hended in  the  more  general  question  of  a  scientific  sociology." 
Robert  Lowe,  M.  P.,  took  up  the  cudgels  against  Ingram;  and 
Cliffe  Leslie,  in  the  article  already  quoted  from,  completely  pul- 
verized Lowe,  and  put  political  economy  on  its  only  tenable  bas- 
is as  "a  department  of  the  science  of  society  which  selects  a  spe- 
cial class  of  social  phenomena  for  special  investigation,  but  for 
this  purpose  must  investigate  all  the  forces  and  laivs  by  which 
they  are  governed."  The  italics  are  mine.  Leslie  himself  was  a 
professor  of  the  rare  kind  possessing  with  up-to-date 
knowledge  an  up-to-date  style  with  which  to  express 
it.  He  had  that  training  in  law  which  is  really  indis- 
pensable to  the  making  of  a  level-headed  economist ;  as  a 
professor  of  the  craft  he  could  not  be  ignored,  and  his  style  in- 
sured him  an  attentive  and  pleasureable  reading.  His  essays  a 
little  before  and  a  little  after  the  beginning. of  the  last  quarter 
of  the  century  drove^each  a  nail,  for  his  circle  of  readers,  into  the 
coffii?  of  classical  or  orthodox  political  economy.  Men  will  no 


836  HERTIG    ON    TAXATION. 

doubt  continue  to  set  up  ready-made  inductions,  empty  or  hali 
empty  abstractions,  as  the  basis  of  deductive  systems,  as  propel- 
ling and  determining  forces  in  all  walks  of  professordom;  but, 
in  political  economy  at  least,  they  are  now  looked  upon  with  sus- 
picion if  not  with  positive  repugnance.  Leslie  in  the  same  es- 
say says,  "A  bold  attempt  may  be  made  now  and  then  hereafter 
to  rehabilitate  Ricardo,  but  practically  he  is  given  up" — Ricardo 
whom  "a  sort  of  mythical  glory  surrounded,"  and  whose  repu- 
tation had  so  "eclipsed  Adam  Smith's  that  for  a  while  the  latter's 
Wealth  of  Nations  was  treated  almost  as  obsolete." 

I  would  fain  linger  yet  a  little  on  Ricardo.  i  delight  to  pic- 
ture the  man  as  described  by  Miss  Edgeworth,  ''face  handsome 
and  manners  delightful,"  and  by  John  Stuart  Mill  who  speaks  of 
"his  benevolent  counsel  and  kindliness  of  manner" — in  contrast 
with  his  great  book,  Principles  of  Political  Economy  and  Taxa- 
tion, "so  remote,  so  abstract,  so  neutral,  not  filled  with  passion," 
and  yet  replete  with  economic  pessimism.  I  delight  to  couple 
with  such  picture  of  Ricardo  for  companion  piece  my  mental 
picture  of  Jonathan  Edwards,  personally  so  kindly,  and  walking 
the  floor  in  an  agony  of  pity  and  terror  for  the  countless  wretch- 
es whom  his  theological  pessimism  must  logically  consign  to 
everlasting  Hell.  Pleased  with  the  decadence  of  the  Ricardian 
economy,  I  own  to  reading  it  still  with  more  pleasure  than  1  read 
any  of  his  critics  and  successors,  and,  I  think,  with  equal  profit. 
They,  indeed  not  infrequently  remind  me  of  their  quasi  yoke-fel- 
lows, the  commentators  of  Shakespeare.  It  is  easy  to  imagine 
the  following  gem  of  Ricardian  criticism  by  Ricardo's  latest  edi- 
tor, Prof.  Conner,  to  have  been  written  apropos  of  the  Shakes- 
peare First  Folio:  "So  far  is  the  work  under  consideration  from 
being  a  perfect  work  that  it  is  disfigured  by  blemishes  and  de- 
fects of  very  many  kinds.  Not  only  is  it  remarkable  for  infelic- 
ity of  language,  with  all  of  its  fatal  consequences  of  exaggera- 
tion and  obscurity,  but  the  grammar  itself  is  halting."  *  *  * 
— "Introductory  Essay"  to  Ricardo's  Principles,  etc.  It  seems 
to  me  deliciously  natural  and  fitting,  but  not,  as  to  De  Quincey, 
a  delicious  wonder  that  Ricardo  had  set  the  professorial  world 
agog,  that  "he  not  in  academic  bowers,  but  oppressed  by  mercan- 
tile and  senatorial  cares,  had  accomplished  what  all  the  univer- 
sities of  Europe  and  a  century  of  thought  had  failed  even  to  ad- 
vance by  one  hair's-breadth."  As  Toynbee  says,  Ricardo  "lived 
in  an  age  of  economic  revolution  and  anarchy."  It  was  a  mighty 
achievement  for  him  to  impose  on  that  age  an  economic  peace 
that  lasted,  though  with  some  skirmishing,  for  nearly  two  gen- 
erations. And  though  in  a  sense  it  is  true  that  his  "intensely 
abstract  science,  deductive  political  economy  *  laid  as 


HERTIG    ON    TAXATION.  337 

a  mask  over  the  living  world,  and  hid  its  face,"  it  is  also  true  that 
this  mask  was  not,  nay  is  not,  without  some  life  of  its  own — is 
not  since  it  still  inspires  the  socialists  and  the  single-taxers.  It 
is  particularly  delicious  that  out  of  Ricardo's  book,  dear  to  the 
philistine  heart,  has  been  shaped  the  figure  of  nemesis  to  oppress 
the  philistine  mind.  "His  book  has  been  at  once  the  great  prop 
of  the  middle  classes,  and  their  most  terrible  menace;  the  latter 
because  from  it  have  directly  sprung  two  great  text-books  of  So- 
cialism, Das  Kapital  of  Karl  Marx,  and  the  Progress  and  Pov- 
erty/ of  Henry  George.  And  yet  for  thirty  or  forty  years  Ricar- 
do's writings  did  more  than  those  of  any  other  author  to  justify 
in  the  eyes  of  men  the  existing  state  of  society." — TOYNBEE, 
lecture  on  "Ricardo  and  the  Growth  of  Rent." 

Official  German  socialism  having  appropriated  some  of  the 
tenets  of  orthodox  political  economy,  and  making  public  claim 
thereto  in  1877;  Henry  George  having  done  something  in  the 
same  kind  but  in  a  different  way,  and  making  his  claim  in  that 
behalf  through  Progress  and  Poverty,  first  published  in  1879; 
and  there  having  been  made,  as  already  stated,  some  professo- 
rial acknowledgment  that  the  sick  "economic  man"  was  as  good 
as  dead, — all  that  remained  to  be  done  was  to  issue  an  official 
certificate  of  death,  and  to  pronounce  the  funeral  oration.  This 
task  was  reserved  for  Professor  J.  K.  Ingram — the  same  In- 
gram, I  believe,  who  had  already  spoken  out  in  1878,  and  who 
now  in  the  Qth  edition  of  the  Encyclopedia  Britannica  supplanted 
the  orthodox  political  economy  article  in  prior  editions  of  that 
work  with  an  article  big  enough  to  make  a  book,  and  which  was 
afterwards  reprinted  as  one.  This  article,  or  book  (of  easy  refer- 
ence since  the  Britannica  is  everywhere)  "was  written  in  the 
'good  God,  good  devil,'  or  historical  style,  and  consisted  in  a 
notice  of  the  writers  on  political  economy,  from  the  most  ancient 
times,  through  a  first,  a  second  and  a  third  modern  phase,  to  the 
coming  or  historical  phase." — HENRY  GEORGE.,  The  Science  of 
Political  Economy,  206.  The  new  fashion  in  political  economy 
was  now  fairly  launched;  the  shackling  old  formulas  broken;  the 
professors  no  longer  professed  the  erstwhile  alleged  science. 
They  merely  wrote  about  the  books  of  those  who  had  professed 
political  economy,  and  humbly,  but  usefully,  collated  and  tabu- 
lated and  showed  in  graphic  curves  the  raw  facts  on  which  the 
new  economy  must  feed.  They  even  contrived,  many  of  them, 
to  get  into  the  broad  current  of  a  paternalism  bearing  them  they 
knew  not  and  know  not  whither.  E.  L.  Godkin,  sometime 
editor  of  the  Nation  and  of  the  New  York  Evening  Post,  was 
an  individualist  who  relished  ill  the  new  economy.  He  held  it  as 
lightly  as  he  did  Henry  George,  or  for  that  matter  as  lightly  as 


338  HERTIG    ON    TAXATION. 

Henry  George  held  it  and  him;  but  Godkin,  as  a  hostile  witness, 
may  be  fitly  cited  to  testify  as  to  the  effect  of  Ingram's  Britan- 
nica  article:  "[Ingram]  helped  to  start  crowds  of  young  profess- 
ors and  labor  agitators  and  politicians  in  search  of  a  new  econ- 
omy which  would  shorten  hours  of  labor,  raise  wages,  humble 
the  employer,  give  the  laborer  a  fair  share  in  the  luxuries  of  life, 
and  eventually  abolish  poverty."-  -"The  Economic  Man,"  North 
American  Revie^tv,  Oct.,  1891.  And  in  the  same  article,  Godkin 
further  characterizes  the  new  status  of  political  economy:  "There 
have  arisen  a  German  school,  an  Austrian  school,  an  English 
school,  a  Russian  school,  and  an  American  school,  which  all  dif- 
fer in  the  matter  of  'method,'  but  all  agree  in  repudiating  Adam 
Smith  and  his  economic  followers,  in  denouncing  laissez  faire, 
laissez  passer  [let  do,  let  pass],  as  an  economic  rule,  in  being 
intensely  'historical'  and  in  endeavoring  to  supply  morality  to 
trade  through  some  sort  of  governmental  interference,  not  as 
yet  clearly  defined.  The  scorn  of  the  new  schools  for  Smith 
and  Mill  and  Ricardo  is  indeed  almost  bitter,  but  their  differ- 
ences about  'method' — that  is,  about  the  exact  nature  of  the  men- 
tal processes  by  which  they  reach  their  conclusions — are  nearly 
as  numerous  as  those  of  the  metaphysicians,  and  are  apparently 
likely  to  prove  as  barren." 

In  this  Babel  and  babble  of  political  economies  which  it 
helped  to  create,  George's  Progress  and  Poverty,  launching  the 
single  tax  in  its  modern  form,  was  treated  by  the  professors  with 
curt  mention  or  silent  contempt :  It  had,  like  many  a  famous 
book  before  it,  to  struggle  with  the  preliminary  difficulty  of  get- 
ting a  publisher.  On  plates  made  at  George's  expense  and  from 
which  he  had  printed  an  "author's  edition"  (sold  "at  a  good  price" 
in  San  Francisco),  a  New  York  firm  charily  printed  the  second 
American  edition,  and  a  London  firm  finally  "published  it  in 
England,  in  sheets  brought  from  the  United  States."  The  Eng- 
lish firm  "were  on  publication  able  to  sell  only  twenty  copies 
in  all  the  three  kingdoms.  But  ere  long  it  began  to  make  its 
way,  and  when  toward  the  close  of  August,  1882,  a  six-penny 
edition  was  issued,  it  began  to  sell  in  tens  and  scores  of  thou- 
sands."— HENRY  GEORGE,  A  Perplexed  Philosopher,  75.  In  fine, 
the  book  circulated  "in  Great  Britain  as  no  economic  work  had 
ever  circulated  before." — Id.  73.  It  was  also  widely  sold  and 
read  in  the  United  States  and  Australia.  It  was  more  than  or- 
thodox in  favor  of  free-trade  and  fairly  orthodox  on  Ricardo's 
doctrine  of  rent;  yet  the  professors  would  have  none  of  it.  The 
German  socialists  drew  from  orthodox  or  classical  political  econ- 
omy, that  the  people  ought  not,  and  some  day  would  not,  "stand 
for"  private  ownership  of  capital;  George  drew  from  the  like 


HERTIG    ON    TAXATION.  339 

economy  that  the  people  ought  not,  and  some  day  would  not, 
"stand  for"  private  ownership  of  land.  The  professors,  bound 
in  the  main  by  inherent  limitations  (to  say  nothing  of  fealty  to 
the  payers  of  their  salaries)  found  it  easier  and  more  comfortable 
to  defend  by  abandoning  political  economy  than  to  defend  with 
it.  And  George  reckoned  it  as  his  particular  grievance  against 
them  that  they  gave  him  the  cold  cut,  preferred  to  so  abandon 
the  old  economy  rather  than  to  completely  recast  it  with  him, 
and  to  give  him  at  the  same  time  due  credit  for  his  share  in  the 
process!  "And  so,"  he  says,  "while  a  few  of  these  professional 
economists,  driven  to  say  something  about  Progress  and  Pov- 
erty, resorted  to  misrepresentation,  the  majority  preferred  to 
rely  upon  their  official  positions  in  which  they  were  secure  by 
the  interests  of  the  dominant  class,  and  to  treat  as  beneath 
contempt  a  book  circulating  by  thousands  in  the  three  great 
English-speaking  countries  and  translated  into  all  the  important 
modern  languages." — Science  of  Political  Economy,  204. 

Private  ownership  of  land  begets  rent ;  the  effect  of  material 
progress  is  to  increase  the  proportion  of  the  product  which  goes 
in  payment  of  rent ;  hence  paroxysms  of  industrial  depression, 
and  the  persistence  of  poverty  amid  advancing  wealth.  Rent, 
in  a  word  is  the  devouring  lion  which  the  single-tax  must  devour 
in  turn.  Such,  in  briefest  form:,  are  George's  main  propositions 
leading  to,  and  stating  the  work  expected  of,  his  single-tax. 
Rent,  in  its  popular  and  commercial  sense,  must  not  be  confound- 
ed with  "economic"  rent,  or,  as  it  is  sometimes  called,  Ricardian 
rent — so  called  because  first  clearly  distinguished  and  formulat- 
ed by  Ricardo.  "Commercial  rent  represents  a  price  paid  for  the 
use  of  land  and  improvements.  A  large  part  of  it  is  interest 
rather  than  rent.  If  we  deduct  the  interest  on  improvements 
from  the  commercial  rent,  the  remainder  is  economic  rent."- 
HADLEY,  Economics,  287.  Now  it  is  this  economic  rent  that 
George  and  his  followers  would  confiscate  by  means  of  the  sin- 
gle-tax,— rent,  as  George  says,  "used  in  the  special  sense  or  tech- 
nical meaning  which  it  has  acquired  since  Ricardo's  time  as  a 
term  of  political  economy."  John  Stuart  Mill  spoke  of  econom- 
ic rent  as-  "the  unearned  increment  of  land  values" ;  and  George, 
having  borrowed  the  expression,  the  vogue  of  his  writings  has 
made  the  general  public  much  more  familiar  with  "unearned  in- 
crement" than  with  its  synonym,  economic  rent.  George  himself 
thought  "net  product"  (the  produit  net  of  the  Physiocrats)  a 
better  term  than  economic  rent  (Political  Economy,  150)  ;  but 
he  used  "rent"  and  "unearned  increment"  together,  and  the  pub- 
lic caught  at  the  more  showy  of  the  two. 

Naturally,  the  single-tax,  should  it  be  adopted,  would  be  a 


340  HERTIG    ON    TAXATION. 

complete  failure  from  George's  standpoint,  unless  it  should  ver- 
ify the  doctrine  of  Ricardo  which  George  adopts,  that  a  tax  im- 
posed on  economic  rent  is  a  tax  on  the  landlord,  and  stays  where 
it  is  put,  that  is  to  say,  cannot  be  diffused  throughout  the  com- 
munity. Followers  of  Ricardo  are  fond  of  claiming  that  it 
can  be  demonstrated  that  such  a  tax  cannot  be  diffused;  that  the 
price  of  produce  determines  the  amount  of  the  rent,  but  rent 
charge  in  no  way  affects  the  price  of  produce.  Here  George 
had  the  old-school  economists  on  the  hip  by  agreeing  with  them, 
and  carrying  the  consequence  of  such  agreement  to  a  point 
where,  as  he  alleges,  they  could  not  in  the  interest  of  the  dom- 
inant class  follow  him.  "From  the  time  of  Ricardo,"  says  Selig- 
man,  "it  has  been  well-nigh  universally  confessed  that  a  tax  on 
land  values,  i.  e.,  a  tax  on  economic  rent,  will  rail  wholly  on  the 
owner."  But  in  political  economy,  no  demonstration  really  dem- 
onstrates, especially  since  the  era  of  artificial  monopolies  has 
set  in;*  and  such  acute  thinkers  as  Isaac  Sherman,  "an  eminent 


*There  are  stiH  those  who  would  bumptiously  degrade  from  the  ranks 
of  thinkers  any  who  deny  Ricardo's  doctrine  of  rent.  Chas.  W.  McFar- 
;ane,  Ph.  D.,  in  his  book  called  Value?  and  Distribution  (Phila.  1899), 
gives  fresh  instance  of  such  bumptiousness:  "There  is  absolutely  no 
hope  for  any  firm  grasp  of  the  most  elementary  problems  of  economic 
theory  until  this  fundamental  concept,  that  rent  is  a  surplus  which  does 
not  enter  into  the  determination  of  price,  has  been  made  part  of  our 
intellectual  furnishing."  p.  87.  "That  price  determines  rent  is,  in  brief 
the  [Ricardian]  doctrine  of  rent."  p.  89.  Hence,  taking  price,  any  price, 
as  a  starting  point,  the  tenant  is  paying  all  the  rent  that  he  can  afford 
to  pay,  with  produce  at  the  price  given;  and  if  the  landlord,  either  be- 
cause of  an  imposed  single  tax,  or  otherwise,  should  raise  the  rent  on 
him,  he  must  quit,  because  the  theory  does  not  permit  the  tenant  to 
raise  the  price  of  produce  to  recoup  himself  for  the  increased  rent. 
Hence,  also,  if  the  theory,  is  true,  a  tax  on  rent  must  fall  on  the  land- 
lord. Of  course,  the  owner  of  land,  who  also  occupies  it,  enjoys  the 
economic  rent  thereof,  the  same  as  if  it  were  paid  to  him  by  a  tenant. 
The  "demonstration"  of  Ricardo's  theory  that  price  determines  rent 
is  in  substance  as  follows:  The  same  market  makes  but  one  price  for 
the  same  thing  at  the  same  time.  Here,  then,  is  a  controlling  uniform- 
ity. Nature  has  made  soils  and  situations  different.  Here,  then,  is  an 
unescapable  diversity.  It  is  natural  to  suppose  that  A  and  B,  farmers 
selling  in  the  same  market  are  on  the  same  footing  and  of  the  like  de- 
gree of  content,  if  A  occupying  a  farm  pays  on  an  average  half  the  prod- 
uce as  rent  to  his  landlord,  and  if  B  similarly  situated  but  on  a  farm 
producing  half  as  much  as  A's  pays  no  rent  at  all.  If  one  farms  under 
his  conditions  the  other  will  under  his.  "There  are  some  lands  in  every 
country  whose  produce  just  repays  the  expenses  of  cultivation,  and 
consequently,"  yielding  "no  margin  for  rent,"  are  rent-free.  There  are 
still  other  lands,  which,  as  the  prices  of  produce  run  for  any  given  time, 
do  not  at  such  time  pay  even  the  cost  of  production,  and  hence  are  not 
cultivated.  But  population  increases,  and  with  it  the  demand  for  food 
and  the  price  thereof.  A  stretch  of  land  that  was  worked  rent-free  be- 


HERTIG    ON    TAXATION.  341 

citizen  of  the  city  of  New  York/'  refuse  to  be  bound  by  any  Ri- 
cardian  demonstration.  Sherman,  over  a  quarter  of  a  century 
ago,  "proposed  a  plan  by  which  all  state  and  local  taxes  at  least 
were  to  be  levied  on  real  estate ;"  proposed  it  with  a  view  to  sim- 
plicity and  convenience  of  levy  and  collection,  and  in  the  belief 
that  it  ought  to  be,  and  by  virtue  of  its  operation  necessarily 
would  be  diffused  throughout,  and  borne  by,  the  whole  communi- 
ty. The  Shermanites,  while  literally  single-taxers,  are  in  ex- 
pectation of  results  diametrically  opposed  to  the  Georgian  single- 
taxers.  The  expectations  of  the  Georgites  rest  wholly  in  the  be- 
lief that  Ricardo's  doctrine  is  true,  that  the  tax  will  stay  where  it 


fore,  because  barely  paying  the  cost  of  production,  now  yields  rent; 
and  the  more  fertile  soils  that  yielded  rent  before  now  yield  an  in- 
creased rent,  while  the  land  that  was  too  poor  in  quality  of  soil  or  top 
remote  in  situation  to  be  worked  even  rent-free,  now  comes  into  culti- 
vation as  yielding  just  enough  to  pay  the  cost  of  production,  but  pays 
no  rent.  The  same  market,  making  the  same  orice  to  produce  of  poor 
soil  and  of  rich  soil,  enables  the  landlord  to  appropriate  as  his  increment 
of  rent  whatever  net  increment  of  price  has  been  added  to  former 
prices,  that  is,  whatever  increase  of  difference  the  new  prices  may  have 
made  between  cost  of  production  and  market  price.  Not  only  will  in- 
creased population,  increased  demand  and  increased  prices  bring  into 
cultivation  the  poorer  soils,  but  also  stimulate  to  a  higher  culture  the 
richer  soils.  It  will  ordinarily  pay  better  the  first  time  to  expend  an 
increased  "dose"  of  capital  and  labor  for  the  higher  cultivation  of  the 
richer  soils  than  it  will  pay  to  expend  the  like  dose  a  second  time.  In 
the  end,  such  successive  doses  of  increased  capital  and  labor  will  prove 
the  law  of  "diminishing  returns,"  when  a  final  further  dose  of  capital 
and  labor  applied  to  the  land  can  just  be  got  back,  and  the  tenant  can  no 
longer,  by  higher  and  higher  culture  outstrip  the  landlord's  share,  which 
is  bound  to  leave  the  tenant  no  more  than  just  that  compensation  for  his 
capital  and  labor  which  will  prevent  his  quitting,  which  compensation  is 
lumped  as  "the  cost  of  production."  "So  that,"  as  the  gentleman  Perry 
protestingly  sums  it  up.  "it  is  the  sole  interest  of  landlords,  as  such,  that 
population  should  be  dense  and  food  high,  their  interest  being  directly 
antagonistic  to  that  of  the  other  classes  of  [the]  community." 

I  quite  agree  with  Prof.  J.  S.  Nicholson  that  "whatever  opinion  is 
held  concerning  the  theoretical  value  of  Ricardo's  doctrine  of  rent,  it 
must  *  *  be  admitted  that  it  is  too  abstract  to  be  of  practical  utility.'' 
— Tenants'  Gain  not  Land  ords'  Loss,  ch  VIII.  In  the  statement  of  the 
theory  there  is  the  implication  of  its  working  automatically  in  a  friction- 
less  medium — conditions  just  the  opposite  of  those  under  which  it  must 
work.  We  know  that  if  special  taxes  were  imposed  on  the  lands  of  only 
a  few  men  in  a  given  country,  men  whose  holdings  comprised  only  a 
small  percentage  of  the  lands  in  such  country,  such  taxes  could  not  be 
diffused;  the  isolated  fact  bearing  upon  the  isolated  individual  practically 
stops  there.  If  a  new  special  land-tax  were  imposed  with  tolerable  uni- 
formity on  all  land-owners  everywhere,  and  continued  from  year  to 
year,  the  results  might  well  conflict  with  any  theoretical  forecast  there- 
of. See  p.  62  above  for  some  particulars  of  the  resisting  medium  which 
cuts  down  the  efficiency  of  abstract  theory. 


342  HERTIG  ON  TAXATION. 

is  meant  to  be  put,  on  the  landlord,  and  so  do  away  with  the 
monopoly  in  land. 

The  single  tax,  then,  from  the  Georgian  standpoint,  would  be 
not  only  a  tax  for  revenue,  but  also  and  preeminently  a  tax  for 
reform.  The  land-owners,  seeing  it  take  their  economic  rent, 
would  give  little  heed  to  the  motives  back  of  it,  and  would  bluntly 
call  it  a  tax  for  robbery.  The  extent  of  the  reforms  hoped  from 
it  are  best  shown  by  this  quotation  from  the  platform  of  the  Sin- 
gle-Tax League :  "It  would  solve  the  labor  problem,  do  away 
with  involuntary  poverty,  raise  wages  in  all  occupations  to  the 
full  earnings  of  labor,  make  over-production  impossible  until  all 
human  wants  are  satisfied,  render  labor-saving  inventions  a  bless- 
ing to  all,  and  cause  such  an  enormous  production  and  such  an 
equitable  distribution  of  wealth  as  would  give  to  all  comfort,  leis- 
ure, and  participation  in  the  advantages  of  an  advancing  civiliza- 
tion." With  such  an  ideal  before  them,  with  a  formula  as  simple 
as  the  single  tax  to  effect  its  realization,  it  is  small  wonder  that 
single  taxers  display  their  well-known  enthusiasm  and  tenacity. 

From  the  fact  that  the  object  of  the  single-tax  is  to  confiscate 
the  technical  Ricardian  or  economic  rent,  follows  the  further  and 
fairly  well-known  fact,  that  the  single  tax,  in  form,  would  be  "a 
tax  on  the  value  of  the  bare  land  irrespective  of  the  buildings  or 
other  improvements  in  or  on  the  land."  The  form  of  the  tax  as 
quoted  is  so  described  by  Prof.  Seli^man,  in  Essays  on  Taxation, 
65.  In  assessing,  for  instance,  farm  lands,  to  levy  the  single  tax, 
the  value  for  such  purpose  could  be  fixed  only  by  deducting  the 
value  of  buildings,  fences,  drains,  all  fertilizers  used  at  all  past 
times,  the  value  of  the  labor  and  care  in  planting  and  looking  after 
groves,  if  not  the  trees  thereof,  etc. 

Land,  in  the  technical  legal  sense,  includes  the  soil,  the  build- 
ings on  it,  and  such  improvements  as  from  their  permanent  and 
really  or  technically  inseparable  nature  the  law  holds  to  be  land 
as  being  a  part  thereof.  The  law  as  to  what  is  and  what  is  not 
land  is  in  its  finer  points  highly  artificial  and  technical,  and  often 
conflicting;  but  in  this  matter  it  deals  only  with  the  tangible;  it 
does  not  attempt  to  separate  mere  qualities  from  the  soil  nor  to 
distinguish  between  the  land  and  the  capital  which  it  has  ab- 
sorbed. It  is  not  so  with  the  single-taxers ;  the  land  of  the  law  is 
physical ;  the  land  of  the  single  tax,  metaphysical.  George  is 
herein  a  strict  follower  of  Ricardo  who  is  highly  metaphysical  in 
his  description  of  the  land  that  yields  rent, — "the  original  and  in- 
destructible powers  of  the  soil."  "Rent,"  says  Ricardo,  "is  that 
portion  of  the  produce  of  the  earth  which  is  paid  to  the  landlord 
for  the  use  of"  these  powers.  A  metaphysical  basis  for  the  exer- 
cise of  a  right  or  the  enforcement  of  a  law,  is  always  a  slippery 


HERTIG    ON     TAXATION.  343 

basis,  until  use  and  custom  sand  it  over.     To  distinguish  with 
minuteness  between  the  value  of  the  bare  land  and  the  value  of  all 
the  improvements  thereon  and  capital  absorbed  thereby,  is  mani- 
festly impossible  after  its  cultivation  and  improvement  for  a  con- 
siderable period.     But  it  should  be  said,  in  justice  to  the  single- 
tax  theory,  that  it  does  not  aim  at  ideal  accuracy  in  taxing  merely 
the  rental  value  of  the  bare  land,  but  aims  only  at  a  workable  "rule 
of  thumb."     As  to  separating  for  valuation  the  metaphysical  land 
from  the  improvements,  George  says :     "No  difficulty  whatever 
can  attend  the  separation,  if  all  that  be  attempted  is  to  separate 
the  value  of  the  clearly  distinguishable  improvements,  made  with- 
in a  moderate  period,  from  the  value  of  the  land,  should  they  be 
destroyed.     This,  manifestly,  is  all  that  justice  or  policy  requires. 
Absolute  accuracy  is  impossible  in  any  system,  and  to  attempt  to 
separate  all  that  the  human  race  has    done    from    what  nature 
originally    provided    would   be    as   absurd   as   impracticable. "- 
Progress  and  Poverty,  Book  VIII.,  ch.  IV.    Assuming  that  some 
state  in  the  American  union  were  to  enact  the  single-tax  theory 
and  that  the  latter  would  successfully  run  the  gauntlet  of  constitu- 
tionality, it  may  be  safely  assumed  also  that  assessors  would  be 
little  embarrassed  by  metaphysical  niceties.     The  real  difficulty 
of  getting  a  single-tax  law  executed  approximately  close  to  the 
letter  and  spirit  of  its  theory,  would  lie  in  the  human  nature  of  the 
assessor  and  the  "dead-set"  that  would  be  made  at  him  to  dis- 
criminate violently  between  the  economic  rental  value  of  different 
lands.    Readers  of  these  pages  will  have  noted  the  great  diversity 
of  assessed  values  within  the  same  state,  often  within  the  same 
city.     Free  caprice,  that  is,  caprice  at  work  without  special  pecu- 
niary prize,  plays  a  curious  role  in  determining  land  values ;  spur 
caprice  with  the  penalty  of  incurring  and  the  prize  of  escaping 
confiscation, — and,  as  human  nature  runs  in  assessors,  boards  of 
equalization  and  courts,  we  should  see  some  amazing  discrimina- 
tions made  and  sustained.    We  should  find  in  practice  a  cloud  of 
conflicting  witnesses  as  to  the  different  economic  rental  values  of 
the  ground  under  A's  lofty  block  and  the  ground  showing  in  B's 
naked  lot  across  the  street.    An  unconverted  bench  and  bar,  it  is 
almost  certain,  would  cut  the  heart  out  of  the  single-tax  law,  by 
"construction  ;"  and  would  most  certainly  do  so,  if  its  going  into 
effect  should  be  attended  with  a  great  scare  on  the  part  of  vested 
interests.     "Even  Henry  George  admitted  a  few  years  ago  [in  an 
address  at  Boston.  Feb.  22,  1889]  that  if  his  scheme  were  put  into 
operation,  it  would  cause  the  savings  banks  and  life  insurance 
companies  to  fail,  and  that  in  an  agricultural  community  it  might 
be  difficult  to  raise  the  money  thought  to  be  needed  for  municipal 
wants." — Report  of  the  Joint  Special    Committee    on    Taxation 


344  HERTIG     ON     TAXATION. 

[Mass.],  1894,  p.  38,  as  quoted  by  Seligman.  The  scare,  then,  of 
vested  interests  is  provided  for  in  advance ;  and  that  fact  is  but 
one  of  many  whose  continued  influence  amounts  to  a  practically 
insuperable  barrier  to  the  adoption  of  the  single-tax. 

It  is  indeed  little  worth  while  to  forecast  the  single-tax  in 
practical  operation,  when  human  nature  as  held  by  the  effective 
majority  of  the  people  is  so  firmly  opposed  to  its  adoption.  Twen- 
ty years  is  a  long  time  in  these  days ;  it  is  that  long  since  Progress 
and  Poverty  was  in  the  sensational  first  flower  of  its  great  boom ; 
but  where  is  the  single-tax  and  where  is  there  any  prospect  of  its 
adoption  ?  George  was  much  more  than  a  mere  author ;  he  was  in 
person  an  active  and  efficient  propagandist;  he  lectured  almost 
everywhere  and  was  heard  by  great  crowds.  He  made  converts 
(as  what  propagandist  will  not?),  and  his  followers,  as  a  rule, 
have  been  enthusiastic  and  tenacious.  No  doubt  something  has 
come  of  it  all:  George  and  his  disciples  have  manifestly  influ- 
enced legislation  in  certain  localities,  and  inspired  attempts  at  leg- 
islation in  other  places.  Perhaps  New  South  Wales  would  not 
have  been  so  aggressively  for  free  trade  had  it  not  been  for 
George's  influence ;  and  there  is  hardly  a  doubt,  though  the  prop- 
osition is  not  undisputed,  that  his  influence  was  strongly  felt  in  the 
making  of  New  Zealand's  land-tax  law,  and  to  a  lesser  degree 
in  that  of  New  South  Wales.  The  latter  Australian  colony  ex- 
empts entirely  the  land-owner's  improvements,  and  exempts  also 
"the  unimproved  value"  of  his  land  to  the  amount  of  two  hundred 
and  forty  pounds,  or  nearly  twelve  hundred  dollars,  that  is  to  say, 
declares  the  land  shall  pay  "such  tax  as  parliament  shall  from  time 
to  time  enact  for  every  pound  of  the  unimproved  value  thereof 
as  assessed  under  the  provisions  of  this  act,  after  deducting  the 
sum  of  two  hundred  and  forty  pounds." — Land  and -Income  Tax 
Assessment  Act,  of  1895.  The  same  act,  however,  provides  com- 
prehensively for  the  taxation  of  incomes,  and  therein  has  many 
noteworthv  features.  But  the  levies  as  fixed  by  further  acts  of  the 
New  South  Wales  parliament  are  at  the  rate  of  "one  penny  in  the 
pound  of  the  unimproved  value  of  all  lands,"  less  the  exemption, 
and  "sixpence  in  the  pound"  on  incomes  exceeding  two  hundred 
pounds  per  annum — those  over  that  amount,  except  in  the  case  of 
"companies"  (corporations),  being  entitled  to  deduct  two  hun- 
dred pounds.  But  "income  derived  from  the  ownership  of  land 
subject  to  land  tax,"  and  "income  derived  directly  from  the  use 
or  cultivation  of  land  subject  to  land  tax,"  are  exempt.  The  law, 
then,  of  New  South  Wales  is  tenderly  protective  of  private  land 
ownership  in  tracts  of  any  size ;  it  exempts  land  incomes,  and 
taxes  other  incomes  at  a  rate  six  times  as  great  as  that  of  the  land 
tax.  This  is  far,  very  far  indeed,  frorn  the  single  tax,  though  they 


HERTIG    ON     TAXATION.  345 

have  followed  George  in  exempting  from  taxation  the  improve- 
ments on  land.     New  Zealand,  however,  has  much  more  of  the 
single-tax  idea  than  New  South  Wales,  inasmuch  as  she,  unlike 
the  latter,  has  a  progressive  tax  on  land, — the  more  the  owner  has, 
the  greater  rate  he  pays.    This  is  meant,  of  course,  to  discourage 
large  holders,  but  the  tax  is  by  no  means  confiscatory,  though  it  is 
said  that  under  its  influence  sales  of  large  holdings  have  been 
much  stimulated.     The  New  Zealand  law  provides  for  taxing  the 
land  of  "every  person  and  company  being  the  owner  of  land" — 
such  tax  to  "be  assessed  and  levied  upon  the  actual  value  of  such 
land,  but  the  value  of  improvements  upon  all  land  owned  by  any 
person  or  company  up  to  three  thousand  pounds  shall  be  deducted 
from  such  assessed  value,  and  any  mortgage  then  due  or  owing 
upon  such  land  shall  also  be  deducted  from  such  assessed  value." 
—Land  and  Income  Assessment  Act,  for  1891.  As  amended  by  the 
act  of  1893,  all  improvements  on  the  land  are  exempt  from  taxa- 
tion.    This  act  defines  "actual  value"  as   meaning  "the  capital 
value  for  which  the  fee-simple  of  land  with  all  improvements  (if 
any)   could  be  purchased  for  cash."     It  defines  "improvements" 
substantially  in  the  Henry  George  sense, — that  is,  they  "include 
houses  and  buildings,  fencing,  planting,  draining  of  land,  clearing 
from  timber,  scrub  or  fern,  laying  down  in  grass  or  pasture,  and 
any  other  improvements  whatsoever,  the  benefit  of  which  is  un- 
exhausted at  the  time  of  valuation."     The  act  makes  liberal  ex- 
emptions from  land  taxation.     The  value  of  improvements  "up 
to  three  thousand  pounds"  is  deducted  from  "the  assessed  value 
of  mortgages  and  all  the  land  of  any  owner ;  and  "the  amount  due 
or  owing  on  mort^ae-e"  by  such  owner  is  also  deducted.     If  the 
remainder  so  obtained  "does  not  exceed  one  thousand  five  hundred 
pounds,  there  shall  be  deducted  by  way  of  exemption  a  sum  of 
five  hundred  pounds,  after  which  the  amount  of  such  exemption 
shall  diminish  by  one  pound  for  every  two  pounds  that  the  as- 
sessed value  of  the  property  increases,  so  as  to  leave  no  exemp- 
tion on  assessed  values  of  more  than  two  thousand  five  hundred 
pounds."     Provided,  however,  he  shall  have  one  exemption  of 
five  hundred  pounds,  if  the  net  remainder  or  assessment  so  arrived 
at  does  not  exceed  two  thousand  five  hundred  pounds ;  but  if  the 
assessed    value,     *     *     *     less    deductions,    shall    exceed    two 
thousand  five  hundred  pounds,  then  no  exemption  shall  be  al- 
lowed."    The  exemption  clause  and  its  proviso  are  awkwardly 
worded ;  but  the  act  elsewhere  declares  that  mortgages  shall  be 
assessed  "as  if  they  were  land."     Hence  the  mortgages  which  a 
land-owner  ozuns  are  assessed  as  part  of  his  land,  while  those  he 
owes  are  deducted  with  improvements  on  the  land.    The  progres- 
sive, or  "the  graduated  tax  on  land,"  is  in  addition  "to  the  general 


346  HERTIG    ON     TAXATION. 

land-tax  of  one  penny  in  the  pound."  In  determining  the  amount 
liable  to  the  graduated  tax  the  value  of  all  improvements  is  de- 
ducted. Then  if  the  assessed  value  so  remaining  is  five  thousand 
pounds  and  less  than  ten  thousand,  the  owner  pays  an  extra  tax 
of  "one-eighth  of  a  penny  in  the  pound  sterling."  This  tax,  by  the 
amended  schedule,  is  increased  by  successive  eighths  of  a  penny 
for  every  five  thousand  pounds  increase  in  the  valuation  up  to 
thirty  thousand  pounds,  when  the  tax  is  five-eighths  of  a  penny  in 
the  pound ;  thence  the  increase  of  tax  is  by  additional  eighths  of  a 
penny  for  each  increase  in  valuation  of  ten  thousand  pounds,  until 
estates  valued  at  between  forty  and  fifty  thousand  pounds  pay 
seven-eighths  of  a  penny;  thence  the  additional  eighths  are  put 
on  by  leaps  of  twenty  thousand  pounds  in  the  valuation,  until  the 
graduated  tax  on  estates  of  two  hundred  and  ten  thousand  pounds 
and  upwards  is  two  pence  in  the  pound.  The  value  of  all  im- 
provements is  deducted  as  well  in  assessing  for  the 
graduated  tax  as  in  assessing  for  the  ordinary  tax, 
but  "No  deduction  shall  be  allowed  *  *  *  in  respect  of  any 
mortgage  from  the  value  of  the  land  upon  which  such  graduated 
tax  is  payable  in  so  far  as  such  graduated  tax  is  concerned."  Now, 
as  there  are  240  pence  in  a  pound  sterling,  it  is  evident  that  even 
for  the  land-owner  holding  land  worth  one  million  dollars  or 
more,  the  extra  tax  of  two  pence  in  the  pound  (a  little  more  than 
four-fifths  of  i  per  cent.),  the  New  Zealand  graduated  tax,  is  by 
no  means  confiscatory,  especially  iTTie'lmproves  the  land.  When 
it  is  added  that  New  Zealand,  too,  has  a  comprehensive  income- 
tax  system,  it  is  very  apparent  that  while  the  single-tax  theory  of 
Henry  George  has  germinated  and  borne  fruit  there,  it  has  not 
"bred  true,"  as  the  saying  is;  has  not  reproduced  its  own  kirrl. 
The  exemption  of  lard  from  taxation  up  to  a  certain  value  shows 
in  both  New  South  Wales  and  New  Zealand  that  the  spirit  of  each 
looks  upon  a  reasonable,  nay  more,  a  liberal  protection  to  the  pri- 
vate ownership  of  land  as  the  indispensable  foundation  of  good 
government. 

The  first  intent  of  the  New  Zealand  democracy  was  to  ex- 
empt all  improvements  ;  but,  as  aforesaid,  the  act  oT  1891  exempt- 
ed them  to  the  value  of  three  thousand  pounds  or  about  $15,000. 
This  was  cautionary  and  experimental, — it  being  then  uncer- 
tain whether  the  needs  of  the  treasury  could  be  met,  if  all  im- 
provements should  be  exempt.  When  it  was  found  that  the  full 
exemption  could  be  safely  made,  the  amendment  of  1893  was 
made  enacting  it.  But  by  taxing  mort^a^es,  which  cover,  of 
course,  not  only  the  bare  land  but  its  improvements  also,  the 
latter  do  not  entirely  escape  taxation.  "The  tax  on  mortgages 
is  of  course  a  tax  on  improvements  as  well  as  on  the  land.  The 


HERTIG    ON     TAXATION.  347 

mortgage  tax  is  also  a  tax  on  the  borrower,  since  the  lender 
not  only  makes  the  borrowers  pay  the  tax,  but  makes  them  pay 
him  a  profit  for  handling  it.     The  commissioner  of  taxes  thinks 
that  this  adds  one-half  of  one  per  cent,  to  the  rate  of  interest. "- 
H.  D.  LLOYD,  Newest  England  (N.  Y.  1900),  114. 

The  exemption  of  improvements  favors  the  city  capitalist, 
since  his  real  estate  has  improvements  much  greater  in  propor- 
tion to  the  value  of  his  land  than  real  estate,  or  broad  acres,  in 
the  country.  But  a  large  number  of  land-owners  pay  no  tax 
at  all.  "Something  like  eight  thousand  to  ten  thousand  of  the 
small  farmers  out  of  sixteen  thousand  have  been  relieved  of 
taxation  by  the  change  from  the  property  tax  to  the  land  and 
income  tax  and  pay  nothing.  Out  of  ninety  thousand  landown- 
ers only  thirteen  thousand  pay  land-tax." — Id.  116.  "It  is  ex- 
pressly planned,"  said  a  New  Zealand  official,  "to  exempt  the 
small  owner  and  to  free  the  struggling  poor  man."  In  fact,  "the 
receipts  of  the  land  tax  are  steadily  decreasing  year  by  year, 
though  land  values  are  increasing."  This  is  on  account  of  the 
liberal  exemption  of  all  improvements  and  of  the  land  itself,  so 
long  as  the  value  of  the  latter  does  not  exceed  $2,500.  "Both  the 
government  and  the  private  owners  are  cutting  up  large  tracts 
into  smaller  pieces.  *  *  The  tax  is  evaded,  too,  *  *  * 

by  dividing  property  of  taxable  size  among  the  members  of  a 
family  into  pieces  small  enough  to  be  exempt." — Id.  119.  The 
radicals  already  urge  the  government  "to  increase  the  gradua- 
tion" both  in  the  land  tax  and  the  income  tax. 

In  New  Zealand,  "Henry  George  is  everywhere  spoken  of 
with  the  greatest  admiration."  The  government  knowing  that 
a  tax  on  mortgages  would  be  in  effect  a  tax  on  improvements 
would  have  willingly  exempted  mortgages,  but  did  not 
do  so  because  it  feared  that  "a  .pure  land-tax  *  *  *  would 
not  raise  revenue  enough."  It  seems,  however,  that  Sir  George 
Grey,  in  1878,  introduced  the  land-tax  into  New  Zealand  finance 
in  a  shape  much  the  same  as  it  has  now ;  but  after  one  collection, 
the  tax  was  repealed  and  the  favorite  of  the  monopolists,  the 
property  tax,  replaced  it." — Id.  121.  "Henry  George  was  not  in 
it,"  the  commissioner  of  taxes  said  emphatically  in  explaining 
that  the  New  Zealand  tax  was  born  before  Henry  George's  ideas 
were  known. — Ibid.  "Henry  George  had  little  influence,"  an- 
other authority  declared.  "He  frightened  us  by  the  confiscatory 
features  of  his  plan." — Ibid.  It  is  plain  from  the  foregoing  that, 
though  the  single-taxer  may  claim  not  without  warrant  that 
George  had  some  influence  and  attracted  a  great  deal  of  admira- 
tion, the  distinctive  feature  of  his  system  and  the  entire  tech- 


348  HERTIG    ON     TAXATION. 

nique  of  his  theory  have,  in  New  Zealand  as  elsewhere,  been  re- 
jected. 

While  the  single  tax  on  land  is  not  new,  and  George  was  not 
its  first  promoter  (all  of  which  with  the  necessary  discrimination 
he  very  candidly  admitted),  he  claimed — and,  I  have  no  doubt, 
correctly — that  the  notion  of  it  came  to  him  before  he  had  hear:! 
or  read  anything  about  his  predecessors,  the  French  school 
founded  by  Quesnay  and  now  generally  called  Physiocrats, 
though  in  their  own  day  and  in  their  own  nation  they  were  gen- 
erally called  "the  economists."  A  reviewer  in  the  Moniteur*, 
writing  in  the  troublous  times  of  the  French  Revolution,  gives 
the  following  summary  of  their  tax  doctrine:  "The  economists 
say  that  the  earth,. being  the  sole  source  of  the  yearly  revenue  of 
a  nation,  "should  be  the  sole  source  of  its  yearly  expenditures ; 
that  the  sum  total  of  tax  levies  always  and  necessarily  falls  on 
the  sum  total  of  landed  properties ;  that  the  landlord  alone  being 
charged,  on  final  analysis,  with  the  payment  of  the  tax,  the  best 
form  of  collection  is  that  which  makes  the  landlord  pay  it  in  the 
most  certain,  the  least  arbitrary,  the  least  costly  way;  that  this 
form  is  that  of  the  direct  tax,  that  is  to  say,  imposed  directly 
on  the  land;  that,  inasmuch  as  the  final  incidence  of  any  indirect 
tax  is  on  the  landlord,  but  in  a  roundabout  way  and  with  an  ex- 
pense that  diminishes  the  net  receipts  from  such  tax, — it  is  mani- 
festly contrary  to  the  true  principles  of  taxation,  to  impose  indirect 
taxes." — Reimpression  dv  I'Ancien  Mcnitcur,  Tome  VII.,  p.  622. 
Hence  the  physiocrat  plan  of  a  single  tax  on  land,  the  once 
much-talked-of  impot  unique.  I  remember  to  have  read,  when 
a  boy,  and  to  have  laughed  over  it,  Voltaire's  piquant  satire,  en- 
titled "The  Man  With  Forty  Crowns,"  when  I  hadn't  the  re- 
motest idea  of  its  economic  significance.  It  is  about  the  single- 
tax,  and  thrusts  at  it  in  Voltaire's  characteristic  way.  The  gos- 
sips of  that  day  record  that  his  wit  swept  it  clean  out  of  serious 
consideration  with  most  Frenchmen.  In  treating  the  impot 
unique  as  tantamount  to  George's  single  tax,  I  do  not  forget 
certain  differences  between  them,  not  material  for  this  discus- 
sion. Seligman  so  neatly  gives  the  essence  of  Voltaire's  satire — : 
I  am  always  pleased  with  a  chance  to  praise  a  professor — that  I 
repeat  it  in  Seligman's  own  words:  "Voltaire  pictured  the  posi- 
tion of  the  French  peasant  toiling  laboriously  amid  conditions  of 
unspeakable  distress,  but  succeeding  in  getting  from  the  soil  a 
product  equivalent  to  forty  crowns.  The  tax  gatherer  comes 
along,  finds  that  the  peasant  can  manage  to  keep  body  and  soul 
together  on  twenty  crowns,  and  takes  away  the  other  twenty. 
Then  the  peasant  meets  an  old  acquaintance,  originally  poor,  who 
has  been  left  a  fortune  of  400,000  crowns  a  year  in  money  and  se- 


HERTIG    ON    TAXATION.  349 

curities.  He  rolls  along  the  highway  in  a  six-horse  chariot,  with 
six  lackeys,  each  with  double  the  peasant's  income;  his  maitre 
d' hotel  gets  2,000  crowns  salary  and  steals  20,000;  his  mistress 
costs  80,000  crowns  a  year.  "You  pay  of  course  half  your  in- 
come, 200,000  crowns,  to  the  state?"  asked  the  peasant.  "You 
are  joking,  my  friend,"  answered  he,  "I  am  no  landed  proprietor 
like  you.  The  tax  gatherer  would  be  an  imbecile  to  assess  me; 
for  everything  I  have  comes  ultimately  from  the  land,  and  some- 
body has  paid  the  tax  already.  To  make  me  pay  would  be  in- 
tolerable double  taxation.  Ta-ta,  my  friend;  you  just  pay  your 
single  tax,  enjoy  in  peace  your  clear  income  of  twenty  crowns; 
serve  your  country  well,  and  come  once  in  a  while  to  take  dinner 
with  my  lackey.  Yes,  yes,  the  single  tax,  it  is  a  glorious  thing." 
— Essays  in  Taxation,  77-8. 

Proudhon,  perhaps  the  most  intense  of  all  the  writers  on 
economics,  and  a  Frenchman  very  different  from  Voltaire,  looked 
upon  the  single  tax,  very  much  as  if  it  were  a  magnifying  glass 
that  would  make  more  glaringly  visible  the  manifold  injustice 
and  imperfections  of  government.  In  his  view,  it  would  prove 
so  abominable  in  practice  as  not  to  be  tolerated  for  a  moment. 
Said  he:  "All  taxes,  let  it  be  said  once  more,  all  without  excep- 
tion, are  stained  with  iniquity,  end  in  iniquity.  Who,  then,  does 
not  see  that  a  single-tax  system,  in  which  there  would  be  con- 
centrated, by  virtue  of  the  exclusion  of  all  others,  the  sum  total 
of  fiscal  iniquities,  would  impose  a  tax  of  prodigious  iniquity,  of 
ideal  iniquity  so  to  speak,  since  the  effect  of  it  would  be  to  show 
in  more  violent  relief  the  anomaly  common  to  any  sort  of  tax, — 
an  anomaly  felt  and  seen  all  the  less  the  more  it  is  diffused  over 
a  variety  of  taxes?" 

I  introduce  next  a  man  keenly  critical,  and  in  that  respect 
like  the  two  Frenchmen  just  quoted;  but,  unlike  them,  fairly  rep- 
resentative of  current  consciousness, — as  manifest,  or  easy  to 
make  manifest,  in  the  United  States.  What  I  call  "current  con- 
sciousness" is  the  polar  opposite  of  that  "historical  conscious- 
ness" which  has  become  so  dear  to  the  average  professorial 
mind.  The  chief  practical  difference  between  them  is  that  his- 
torical consciousness  is  an  excellent  thing  to  make  a  book  about 
for  him  to  whom  no  other  subject  appeals  more  strongly,  while 
current  consciousness  is  the  potent  but  dimly  apprehended  factor 
that  is  to  give  color  and  form  to  the  next  thing  or  things  that  is 
or  are  about  to  become  matter  of  history.  Without  at  all  trench- 
ing on  the  question  of  what  Time  is,  or  what  in  the  speculative 
mind  it  is  thought  to  be,  we  may  say  that,  for  us  at  least,  there 
has  been  more  of  real  time  in  the  last  fifty  years  than  in  all  the 
cycles  that  had  elapsed  before.  The  human  nature  that  is  here 


350  HERTIG  ON  TAXATION. 

and  now  eating  its  bread  or  bewailing  its  husks  is  not  going  to 
change  its  forms  and  objects  of  Want  and  Will  for  any  profes- 
sorial delving  into  the  buried  sub-cellars  of  its  remoter  con- 
sciousness. For  the  rest,  these  sub-cellars  are  very  opaque  to 
the  modern  light.  When  individual  figure  and  circumstance  ap- 
pear only  in  dim  or  distorted  outline,  what  is  to  be  said  of  the 
composition  and  the  grouping?  We  need  not  go  so  far  as  to 
say  with  the  notorious  Englishman,  "As  to  history  I  know  that's 
a  lie;"  but  we  may  safely  amend  by  saying,  Most  histories  might 
as  well  be  lies.  Thus,  for  illustration  in  our  immediate  field, 
Burkhardt,  "a  celebrated  German  historian,"  was  utterly  mis- 
taken "when  he  characterized  the  [Roman]  aristocracy  as  resting 
on  the  privilege  of  hereditary  immunity  from  taxes.  He  mis- 
interpreted the  word  immunities,  which  is  applied  to  the  sena- 
tors, and  means  merely  freedom  from  municipal  taxes." — J.  B. 
BURY,,  History  of  the  Later  Roman  Empire,  I.,  41.  So,  also, 
and  with  equal  pertinence  to  our  field,  come  in  the  conflicting 
theories  as  to  the  origin  and  prirnitive  forms  of  land-ownership. 
There- is  a  certain  type  of  mind  that,  before  answering  the  ques- 
tion, Is  this  plan  of  taxation  workable,  is  it  the  outgrowth  of  a 
real  need? — will  appeal  to  history  to  furnish  at  least  a  part  of  the 
answer.  Persons  having  such  type  of  mind  may  become  con- 
verts or  opponents  according  as  they  think  the  historical  evidence 
preponderates.  But,  in  general,  the  effective  propagandist  be- 
comes so,  or  is  converted  first  by  sentiment  springing  from  what 
lies  near  at  hand;  and  it  is  only  after  his  conversion  that  he  re- 
inforces his  new  position  and  new  feeling  with  arguments  from 
the  ancient  law  and  the  long-moldered  prophets.  History,  then, 
furnishes  food  and  a  modicum  of  motive  power  for  the  pedantic 
herd ;  she  furnishes  weapons  to  the  controversialists  of  any 
school ;  and  she  serves  as  perpetual  illustration  of  the  fact  that 
her  expounders  are  exceedingly  fallible  in  their  exposition,  and 
that  their  suppositions  past  is  in  general  only  a  very  spurious 
sort  of  present.  What  sentimental  dreams  of  a  vanished  past 
might  heap  up  in  the  form  of  mythical  golden  ages  had  we  no 
historic  time  at  all,  or  what  is  the  same  thing  no  records  there- 
of, is  a  hypothesis  too  violent  to  follow;  perhaps  such  dreams 
would  depart  little  further  from  the  truth  than  those  dreamed 
by  modern  Germans  on  the  brief  mention  of  the  ancient  Ger- 
mans by  Julius  Caesar  in  his  Commentaries  and  on  the  more  ex- 
tended but  unknowably  misleading  mention  of  them  by  Tacitus 
in  his  Gcrmania.  Historical  facts  are  much  like  spent  shot;  the 
force  they  once  had  is  an  extinct  force,  not  indeed  lost,  but  radi- 
ated away  out  of  all  appreciable  individual  form.  Admit  that  the 
present  statutes  of  Louisiana  are  largely  traceable  to  the  civil 


HERTIG    ON    TAXATION.  351 

codes  of  Rome, — yet  even  there  old  Rome  has  shot  her  bolt,  as 
such  it  is  spent,  transformed  into  new  forms  alive  with  new 
forces.  But  a  fact  preserved  in,  and  acting  through,  an  ancient 
writing  has  still  some  life  of  its  own;  hence  the  comparison  of 
such  fact  with  spent  shot  is  not  so  close  and  so  just  as  the  com- 
parison therewith  of  the  great  mass  of  historical  facts  whose  spe- 
cific form  has  perished  utterly.  It  is  our  present  -and  our 
relatively  immediate  past  that  now  make,  repeal  and  amend 
laws;  it  is  our  present  and  our  relatively  immediate  past  that 
contain  and  measure  the  specific  causes  that  will  mould  tomor- 
row and  the  days  that  shall  follow  tomorrow.  The  man  who  is  in 
close  touch  with  his  present,  is  also,  but  perhaps  not  consciously, 
in  close  touch  with  his  relatively  immediate  past.  I  could  not, 
in  a  shorter  paragraph,  vouch  for  the  value  and  credibility  of  cur- 
rent American  consciousness  on  the  single-tax  question;  and  to 
that  consciousness  I  now  let  William  H.  Grimshaw  of  Minne- 
apolis give  voice. 

Grimshaw,  in  certain  lectures  locally  well  known,  has  taken 
the  ground  that  whatever  of  vogue  the  single  tax  has  attained 
is  due  to  the  ingenuity  and  sincerity  of  Henry  George  rather  than 
to  any  merit  in  the  single-tax  scheme.  His  argument  against 
George's  plan  is  based  on  the  hypothesis  of  its  adoption  by  the 
American  people  and  of  its  continuing  in  force  according  to  the 
Georgian  intent  long  enough  for  the  results  of  its  adoption  to 
become  manifest — an  hypothesis,  certainly,  to  which  no  single- 
taxer  should  object.  The  hypothetical  results  are  condensed  by 
Grimshaw  into  ten.  propositions,  as  follows : 

"i.  The  single  tax  would  exclude  all  other  forms  of  taxation, 
therefore  protection  would  cease,  and  free  trade  take  its  place, 
and  all  revenues  now  collected  by  tariff,  fines,  stamps  and  licenses 
would  be  abandoned  and  abolished. 

"2.  The  single  tax  would  eventually  make  common  property 
of  land.  Much  of  it  would  go  back  to  the  state,  and  socialism, 
pure  and  simple,  would  be  the  result. 

"3.  It  would  increase  the  opportunities  of  the  rich  to  become 
richer,  by  removing  the  tax  from  their  money,  bonds,  stocks, 
mortgages,  which  would  be  to  the  detriment  of  the  poor. 

"4.  Its  adoption  would  drive  nearly  all  capital  into  other 
untaxable  property,  leaving  the  poor  to  use  the  land  and  pay  the 
tax. 

"5.  By  dispensing-  with  all  fines,  stamps  and  licenses, — sa- 
loons, distilleries,  brothels,  moonshiners,  fakirs,  venders,  peddlers 
".nd  auctioneers  would  swarm  into  the  cities  and  on  our  streets, 
jeopardizing  legitimate  business. 

"6.     It  would  break  all  large  holders  of  real  estate,  as  well  as 


352  HERTIG    ON    TAXATION. 

all  holders  of  mortgages  on  the  same,  and  cause  world-wide  dis- 
aster. 

"7.  It  would  destroy  the  symmetry  of  our  architecture.  The 
poor  would  congregate  in  hovels  upon  squatters'  land,  while  the 
rich  would  build  forty  and  fifty-story  buildings  on  as  small  a 
piece  of  land  as  possible. 

"8.  The  system  of  taxation  now  in  vogue  is  too  much  like  the 
single  tax.  Land  is  already  taxed  too  high,  while  other  property 
is  allowed  to  escape. 

"9.  By  rendering  the  security  of  mortgages  worthless,  the 
savings  bank  would  be  unable  to  pay  depositors,  and  again  the 
poor  would  suffer  nearly  all  the  hardships. 

"10.  Throwing  aside  all  other  objections,  the  single  tax  is  so 
impracticable  it  can  never  be  adopted.  The  original  owners  and 
mortgagors  would  fight  for  their  equity  to  the  verge  and  reality  of 
revolution.".  '•' 

As  comparatively  few  persons  advocate,  or  think  seriously 
about,  absolute  free  trade,  without  which  the  single  tax  could  not 
be  single,  Grimshaw  scores  by  dwelling  on  some  of  the  more  ap- 
parent results  of  real  free  trade.  Nor  does  he  forget  the  usual 
arguments  in  favor  of  protection,  as  that  ''the  average  locomotive 
used  on  our  railroads  costs  thirteen  thousand  dollars,"  of  which 
ten  thousand  represents  the  wages  of  skilled  labor,  "while  only 
three  thousand  represents  material" ;  and  that  another  machine, 
the  linotype,  costs  thirty-five  hundred  lollars, — "three  thousand 
for  skilled  labor,  five  hundred  for  material."  What  would  mater- 
ially cheapen  the  market  price  of  these  and  the  like  Manufactures, 
he  argues  would  necessarily  cut  the  wages  of  the  workmen.  He 
mentions  that  under  absolute  free  trade  the  enormous  revenues 
collected  by  the  federal  government  from  duties,  stamps,  and  in- 
ternal revenue  taxes,  in  short  all  of  the  present  federal  revenues, 
would  wholly  disappear.  What  would  the  people  think  of  raising 
by  a  special  land-tax  the  vast  revenue  needed  by  the  federal  gov- 
ernment? How  would  they  relish  dropping  the  internal-revenue 
tax  on  whisky  yielding  $84,00x3,000  annually,  and  the  tax  on  to- 
bacco yielding  $64,000,000? 

That  the  single-tax  would  result  in  socialism,  he  argues,  be- 
cause from  the  non-payment  of  taxes,  the  state  would  take  pos- 
session of  most  of  the  land,  make  the  farmer  its  tenant,  and  "when 
the  state  owns  all  the  land,  and  the  people  lose  all  right  and  title 
to  their  home,  then  the  first  step  has  been  taken  toward  national 
socialism.  *  *  *  Liberty,  patriotism,  justice,  charity,  benev- 
olence and  courage  are  all  flowers  that  blossom  under  the  roof  we 
call  our  own,  especially  that  to  which  we  have  a  warranty  deed. 
*  *  *  Few  men  possess  patriotism  enough  to  take  up  arms  ifi 


HERTIG    ON    TAXATION.  353 

defense  of  a  boarding  house.  Common  property  of  land  means 
very  common  people  on  the  land." 

Under  his  third  proposition,  Grimshaw  enumerates  some  of 
the  superior  advantages  and  opportunities  of  him  who  under  the 
single  tax  system  would  invest  a  fortune  in  anything  but  land, 
and  independently  falls  into  a  line  of  illustration  not  .unlike  that 
used  by  Voltaire  in  "The  Man  with  Forty  Crowns."  He  illus- 
trates further  the  superior  advantage  which  the  great  capitalist, 
even  as  a  land-owner,  would  have  over  the  owner  whose  capital 
should  be  all  invested  in  an  unimproved  lot.  The  rich  man 
covers  his  entire  lot  with  a  palatial  mercantile  building.  "Thirty 
stories  *  *  of  steel  construction ;  *  *  *  foundation 

of  granite ;  *  *  three  or  four  sub-cellars.  He  veneers  the 

exterior  of  his  building  with  rare  and  costly  marble,  and  wain- 
scots the  interior  with  Mexican  onyx."  He  exhausts  every  de- 
vice of  architect  and  builder  to  enhance  the  safety,  comfort  and 
splendor  of  the  building.  He  fills  it  with  merchandise  worth  mil- 
lions of  dollars,  and  comprising  every  article  that  may  minister  to 
human  need  and  human  luxury.  And  yet  "the  single  tax  theorist 
advises,"  that  he  be  made  to  pay  no  more  tax  than  his  neighbor 
with  the  bare  lot  and  no  money  to  improve  it.  "One  lot  covered 
with  oyster  cans  and  rank  weeds,  and  surrounded  by  bill  boards ; 
the  other  covered  with  a  palatial  building,  thirty  stories  in  height," 
with  improvements  and  merchandise  aggregating  many  millions 
of  dollars,  "and  each  to  be  taxed  exactly  the  same,  without  regard 
to  improvements,  buildings  or  goods.  To  me  this  proposition 
borders  on  insanity."  Again:  "it  is  estimated  that  the  railroads 
pay  annually  forty-five  million  dollars  to  the  different  states  for 
taxes.  Every  one  knows  they  do  not  pay  enough." 

What  kind  of  reform  is  it  that  would  take  the  tax  off  all  railroad 
property  except  their  right  of  way  and  their  terminals  ?  How 
will  it  sit  on  street  or  granger  politician  who  complains  of  na- 
tional bank  monopolies,  when  the  single. tax  shall  "remove  the 
tax  from  every  cent  of  their  capital,"  exempt  their  deposits, 
stocks,  bonds  and  mortgages ;  "in  fact,  tax  nothing  but  the  lot 
upon  which  their  building  stands?"  How  will  farmer  A  like  to 
see  the  banks  exempted,  the  village  money-lender  exempted,  the 
railroads  substantially  exempted,  and  his  neighbor  B  taxed  no 
more  on  his  farm  than  A  is  taxed  on  his  own  ?  A  "breaking  in  a 
new  farm  without  capital  and  B  running  an  old  farm  with  in- 
herited wealth,"  and  fancy  live  stock,  commodious  buildings,  all 
manner  of  machinery,  and  even  a  fine  orchard. 

The  theory  of  Grimshaw's  fourth  proposition  is  that  the  pick 
of  the  opportunities  to  pay  the  rental  value  of  the  bare  land  and 
still  make  a  profit  on  the  improvements,  would  be  taken  by,  or 


354  HERTIG    ON    TAXATION. 

continued  in,  the  rich,  and  that  whatever  abundance  of  landed 
opportunity  might  remain  for  the  poor  man,  would  be  so  burdened 
with  the  single  tax,  as  to  leave  him  only  a  scanty  subsistence  as 
his  reward  for  working  the  land. 

Under  his  fifth  proposition,  Grimshaw  mentions  the  proved 
efiicacy  of  a  tax  for  regulating  saloons,  street  fakirs,  and  all  those 
lines  of  street  hawking  and  vending  which  are  "a  detriment  to 
all  landlords  and  tenants  alike."  The  single  tax  would,  of  course, 
leave  no  choice  except  as  between  entire  suppression,  gratuitous 
licensing  by  favoritism,  and  free  open  opportunity  to  all  comers. 
In  the  latter  contingency,  "every  blear-eyed  tramp  in  the  country 
who  could  raise  the  price  of  one  month's  rent  and  four  gallons 
of  cheap  whiskey,  would  *  *  *  proceed  to  the  manufacture 
of  drunkards."  In  illustration  of  the  importance  and  ease  of  col- 
lection of  license  revenues,  he  gives  the  following  statement  of 
the  moneys  collected  by  the  city  of  Minneapolis  for  the  year  1898, 
"in  the  shape  of  fines  and  licenses" : 

300  Saloons $307,000 .  oo 

Horse  Express 777  •  °° 

Cabs  and  Hacks 369 .  oo 

Peddlers 4,085 .  oo 

Junk  Dealers .  . .  > 1,572.00 

Pawnbrokers  and  Auctioneers 2A2S  -00 

Scavengers 375 .  oo 

Billiard  Tables 1,000.00 

Circuses i  ,274 .  oo 

Employment  Bureaus 922 .  oo 

Dog  Tax 7,500.00 

Miscellaneous   400 .  oo 


Total $327,699.00 

"Now  why,"  he  asks,  "should  the  city  sacrifice  this  amount  of 
funds  ?  Is  it  simply  that  the  same  amount  may  be  raised  by  way 
of  a  single  tax  on  land?  Will  some  one  explain,  or  give  a  good 
reason  for  removing  this  tax  of  $307,000  from  the  rum-sellers  of 
this  city,  and  placing  it  on  the  home  of  thej)oor,.jLnan?" 
/l  In  talking  to  a  Minneapolis  audience,  Grimshaw  was  talking 
to  persons  who  had  been  passing  through  a  bitter  experience  as 
to  the  effect  of  high  taxes,  and,  I  may  add,  of  unequally  high 
taxes  on  real  estate.  To  such  audience  it  came  home  with  special 
emphasis  that  though  land-owners  in  the  aggregate  have  a  monop- 
oly of  the  land,  the  individual  land-owner,  or  monopolist,  is  at 
times  a  very  sore  and  sorry  monopolist.  Stating  that  seventy 
per  cent  of  land-owners  "are  bankrupt  under  the  present  system," 
he  argued  that  two-thirds  of  the  aggregate  taxes  of  the  country 


HERTIG    ON    TAXATION.  3.f>5 

are  obtained  from  taxes  on  improvements  and  other  personal 
property,  from  fines,  licenses,  and  tariff;  hence  if  the  remaining 
third  levied  on  land  values  has  already  bankrupted  more  than 
two-thirds  of  the  land  owners,  it  is  plain  that  to  raise  all  the  tax 
by  direct  assessment  on  the  lands  "would  certainly  bankrupt  them 
all."  "In  Hennepin  county,  the  average  piece  of  unimproved  real 
estate  is  confiscated  by  way  of  taxation  every  ten  years,  and  under 
the  single  tax  method,  the  same  thing  would  be  accomplished  in 
less  than  half  the  time."  The  going  into  effect  of  the  single  tax 
would  so  reduce  the  value  of  real  estate  that  it  "would  not  sell 
for  the  average  mortgage." 

Under  his  seventh  proposition,  the  keynote  is  that  "people  will 
not  beautify  or  adorn  habitations  which  they  feel  to  be  a  tempor- 
ary abode."  There  is  much  truth  in  this;  but  it  should  be  noted 
also  that  where  the  tenure  is  secure  and  fixed  at  a  satisfactory 
rental  through  a  long  term,  magnificent  improvements  are  often 
made,  as  under  the  ground  rent  system  in  large  cities.  But  with 
a  capricious  rental,  to  be  changed  at  short  intervals  by  an  assessor, 
and  under  a  system  of  doubtful  durability  and  of  doubtful  legal 
effect, — it  is  certain  that  only  temporary  improvements  would  be 
made.  Whether,  as  Grimshaw  argues,  the  landlord  for  whom  he 
was  making  plans  for  a  two-story  apartment  building  having  one 
hundred  feet  front  and  an  average  height  of  twenty-five  feet, 
would,  immediately  upon  the  adoption  of  the  single  tax,  reverse 
the  proportions  and  make  his  building  one  hundred  feet  high  and 
twenty-five  feet  wide, — would,  I  take  it,  depend  upon  what  con- 
fidence the  landlord  might  have  in  the  duration  of  the  single  tax. 
In  the  face  of  what  would  seem  to  him  a  revolutionary  measure, 
he  could  profitably  pause  awhile  before  building  at  all.  He  might 
even  make  calculation  that  the  single  tax  would  last  just  long 
enough  to  send  many  a  choice  lot  to  the  bargain  counter,  and  be 
repealed  after  bargain-hunters  had  got  what  they  should  happen 
to  want.  In  which  case  he  would  save  his  money  against  the 
right  time  to  buy.  But  a  fairy-tale  hypothesis  putting  on  the 
sober  garb  of  reality,  is  an  irresistible  reminder  of  Napoleon's 
hundred-day  government  after  his  fairy-like  return  from  Elba. 
Technically  the  Empire  with  its  rigid  police  system  was  restored ; 
in  fact  the  policemen  themselves  were  like  persons  in  a  day 
dream,  practically  unable  themselves  to  account  for  the  relaxation 
they  permitted  from  the  former  rigidity. 

Under  his  eighth  proposition,  Grimshaw.  said  with  much  ear- 
nestness : 

"The  buildings  in  this  or  any  other  city  are  not  assessed 
enough.  The  unimproved  lots  in  this  and  every  other  city  are 
assessed  too  much.  The  governmental  expense  each  year  for 


356  HERTIG    ON    TAXATION. 

protecting  and  preserving  the  buildings  is  much  greater  than  for 
land,  and  the  taxes  for  such  protection  should  be  greater  instead 
of  less  than  for  land.  Everybody  who  knows  anything  at  all 
about  the  fearful  burdens  of  taxation,  that  are  absolutely  threat- 
ening the  actual  confiscation  of  most  of  the  lands  in  this  city, 
knows  that  the  general  taxes  are  a  simple  feather  weight  com- 
pared to  the  crushing,  grinding,  insupportable,  weight  of  special 
taxes.  And  now  let  us  look  at  this  matter  just  as  it  is,  and  see 
how  small,  how  utterly  insignificant,  a  part  of  the  actual  heavy 
burden  of  taxation  is  borne  by  buildings  and  improvements  when 
compared  with  the  land.  Of  course,  you  will  understand  I  am 
speaking  only  of  city  property.  The  following  figures  I  have  re- 
ceived from  the  auditor  of  Hennepin  county : 
"For  curb  and  gutter  taxes ;  the  lands  bear  it  all  and 
the  buildings  bear  none.  The  tax  for  this  pur- 
pose for  the  year  1898  was $  9,256.00 

"For  water  main  taxes;  the  land  bears  it  all  and  the 
buildings  none.  The  tax  for  this  purpose  for  the 

year  1898  was 310,000.00 

"For  sewer  taxes ;  the  land  bears  all  and  the  buildings 
bear  none.  The  tax  for  this  purpose  for  the  year 

1898  was 56,956. oo 

"For  sidewalk  taxes ;  the  land  bears  all  and  the  build- 
ings bear  none.  Tax  for  this  purpose  for  the  year 

1898  was  99,39!  •  o° 

"For  pavement  taxes ;  the  land  bears  all  and  the 
buildings  bear  none.  The  tax  for  this  purpose 

for  the  year  1898  was 7°>255  •  °° 

"For  sprinkling  taxes ;  the  land  bears  all  and  the 
buildings  bear  none.  Tax  for  this  purpose  for 

the  year  1898  was 106,823 .  oo 

"For  tree  planting  taxes ;  the  land  bears  it  all  and  the 
buildings  none.  The  tax  for  this  purpose  for  the 

year  1898  was 15,000.00 

"For  street  and  alley  opening  taxes  ;  the  land  bears  it 
all  and  the  buildings  none.  The  tax  for  this 

purpose  for  the  year  1898  was 6,515 .  oo 

"For  the  revolving  fund  taxes ;  the  land  bears  it  all 
and  the  buildings  none.  The  tax  for  this  pur- 
pose for  the  year  1898  was 31,000.00 

"For  the  enormous  confiscating  park  taxes ;  the  lands 
bear  it  all  and  the  buildings  none.  The  tax  for 
this  purpose  for  the  year  1898  was 140,866.00 

"This  makes  a  total  of $539,166.00 


HERTIG    ON    TAXATION.  357 

"For  the  repairs  and  renewals  of  the  water  mains,  of  the  sew- 
ers, of  the  sidewalks,  of  the  pavements,  of  the  curb  and  gutter, 
of  re-planted  trees,  of  park  improvements,  incredibly  large  sums 
are  assessed  every  year,  and  every  dollar  of  it  is  heaped  upon  the 
land  and  none  upon  the  buildings.  Now  remember  that  this  tax 
is  raised  by  assessment  of  so  much  per  front  foot,  regardless  of 
the  improvements  on  the  land.  Vacant  lots  and  improved  lots 
suffer  the  same  assessment.  By  the  time  we  have  paid  for  all  of 
the  improvements  on  both  sides  of  our  vacant  corner  lots,  we 
have  bought  the  property  the  second  time.  Many  people  have 
lost  their  property,  owing  to  this  exorbitant  special  tax  on  land, 
and  if  all  the  tax  was  placed  on  land  as  is  desired  by  the  single- 
taxer,  the  result  would  be  that  the  state  would  soon  take  posses- 
sion of  the  land.  All  of  these  special  taxes  are  required  by  the  build- 
ings on  land.  Without  the  buildings  there  would  be  no  tenants,  and 
without  tenants  the  lands  would  not  be  in  need  of  cither  sewer, 
pavement,  water  main,  curb,  gutter,  sprinkling,  or  any  other  of  the 
necessities  that  the  buildings  require.  Hence,  I  say,  that  these 
special  taxes  should  be  borne  partly  by  the  structures  on  the  land, 
and  in  proportion  to  their  size  and  height.  The  lands  around  the 
parks  should  be  taxed  but  little,  and  the  elegant  homes  should  be 
taxed  more  than  at  the  present.  Far  the  heaviest  item  of 
the  city's  expenses  for  which  taxes  are  collected  is  for  the_fire_ 
—-^department,  which  includes  all  of  the  expenditures  for  horses, 
carriages,  hose  carts,  for  engines,  for  extinguishers  for  water 
power,  for  ladders,  for  hose,  for  engine-houses,  for  telegraph 
wires,  boxes  and  fixtures,  for  the  army  of  men  constantly  on  duty 
day  and  night,  and  for  the  thousands  of  other  incidental  expenses 
which  are  incurred  on  account  of  the  buildings,  and  none  whatever 
on  account  of  the  land.  What  justice  is  there  in  taxing  land  a  cer- 
tain price  per  front  foot  for  water  mains  when  'they  are  put  in 
solely  to  accommodate  and  protect  the  buildings.  The  same 
question  can  be  asked  in  regard  to  sewers.  In  short,  the  build- 
ings are  the  actual  occasions  for  more  than  nine-tenths  of  the  ex- 
pense for  which  special  taxes  are  assessed,  while  the  lands  already 
pay  more  than  nine-tenths  of  those  same  taxes  caused  by  the 
buildings.  Now  in  sober  candor  and  common  honesty,  should 
any  more  of  those  burdens  occasioned  by  the  buildings  be  trans- 
ferred from  the  buildings  to  the  land  ?  Ap;ain  I  insist,  that  the 
proposition  of  the  single  tax  to  place  all  tax  on  the  land  is  the 
most  senseless,  absurd  and  unjust  scheme  ever  originated  in  thr 
mind  of  man." 

Under  his  ninth  proposition,  Grimshaw  touched,  but  only  in 
criticism  of  the  single  tax,  what  is  in  fact  the  burning  point  in 
all  schemes  for  the  redistribution  of  property, — the  cataclasm  of 


358  HERTIG  ON  TAXATION. 

^  + 

the  small  security-holder,  of  the  savings-bank  depositor.  Giving 
the  census  figures  of  1890  to  the  effect  that  savings  deposits  were 
then  in  this  country  the  enormous  aggregate  of  $1,524,844,506, 
and  predicting  a  handsome  increase  to  be  shown  by  the  figures  for 
1900,  [I  note  in  the  treasury  statistics  savings  deposits,  in  1901, 
were  $2,597,094,580],  he  said :  "Most  of  this  money  is  loaned  on 
real  estate  security,  and  most  of  it  is  the  savings  of  poor  people. 
Change  the  conditions,  and  we  change  the  security ;  tax  the  prop- 
erty higher,  ard  the  security  at  once  becomes  weaker.  Un- 
thoughtful  people  would  jeopardize  this  vast  hoard  of  money  bir 
changing  our  present  system  of  taxation.  Any  savings  tanker  of 
prominence  will  tell  you  that  the  most  dreaded  thing  in  his  busi- 
ness is  to  take  real  estate  by  foreclosure  for  money  loaned  on  the 
same."  As  I  stated  above,  George  himself  admitted  that  the 
putting  of  his  system  into  effect  would  ruin  the  savings  banks. 

Under  his  tenth  proposition,  Grimshaw  emphasizes  what  oc- 
curs at  once  to  every  practical  reader  of  human  nature  in  connec- 
tion with  the  single  tax,  and  which  banishes  it  forever  to  the 
realm  of  the  impossible, — the  people  do  not,  and  never  will,  want 
the  single  tax.  On  this  proposition  it  is  useless  to  multiply  opin- 
ions. 

Prof.  Seligman  in  his  Essays  in  Taxation,  pp.  64-94,  reviews 
the  single  tax  with  sufficient  candor  and  fulness.  Against  him 
at  least  the  complaint  which  George  made,  as  above  set  forth,  of 
unfair  treatment  at  professorial  hands  does  not  lie.  Against  the 
single  tax  "as  a  practical  method  of  tax  reform,"  Seligman 
urges  four  classes  of  defects . — the_fiscal~def ects ,  the  political  de- 
fects, the  moral  defects,  and  the  economic  defects. 

The  chief  fiscal  defect  of  the  single  tax  is  its  lack  of  elas- 
ticity. In  sound  public  finance  one  of  the  great  aims  is  "to  avoid 
a  surplus  as  well  as  a  deficit."  Many  taxes  may  be  suddenly- 
lowered,  immediately  decreasing  the  revenue;  few  can  be  mi.de 
to  give  a  suddenly  increased  vield.  Elasticity  can  be  secured 
only  by  taxing  a  number  of  objects,  "so  that  the  shrinkages  or 
deficits  temporarily  due  to  the  one  class  may  be  made  good  by  the 
increase  or  surplus  -revenues  of  the  other  class."  It  is  well- 
known  that  income  taxes  are  elastic,  and  in  England  the  income 
tax  is  the  stand-by  "to  preserve  the  equilibrium  of  the  budget." 
[The  English  income  tax,  at  a  rate  greatly  increased  on  account 
of  the  Boer  war,  has  given  fresh  proofs  of  its  elasticity  and  of  the 
financial  reserve  power  it  embodies.]  The  single  tax  is  by  its 
very  purpose  and  intent  non-elastic,  "since  according  to  the 
theory  of  the  advocates,  the  total  rental  value"  of  the  land  is  to 
be  taken.  "Where  nothing  has  been  left,  nothing  more  can  be 
taken" ;  and  the  single  tax  would  be  helpless  to  increase  the  rev- 


HERTIG    ON    TAXATION.  359 

enues  in  case  of  emergency.  Though  the  total  rental  value  were 
not  taken,  yet  a  direct  tax  on  the  unimproved  value  of  the  land 
would  be  far  more  inelastic  than  other  taxes.  The  single  tax 
would  show  another  fiscal  weakness  by  intensifying  "the  in- 
equalities resulting  from  unjust  assessments."  [The  caprice  in 
assessments  has  already  been  sufficiently  mentioned.  Compare 
Proudhon's  ascription  of  "fiscal  iniquities"  to  the  single  tax,  and 
my  comment  above  on  Grimshaw's  condemnation  of  trie  single 
tax.] 

The  political  defects  of  the  single  tax  are  three :  it  would  pre- 
clude the  use  of  import  duties  for  any  purpose ;  "would  render  it 
impossible  for  governments  to  utilize  the  taxing  power  as  a  politi- 
cal or  social  engine"  [or  to  tax  for  any  reform  other  than  its  in- 
tended breaking  up  of  the  land  monopoly]  ;  would,  thirdly,  accen- 
tuate whatever  danger  there  may  be  for  democracy  in  the  pay- 
ment of  taxes  by  a  small  class  and  in  the  voting  thereof  by  a  large 
class.  Whoever  has  a  bias  for  free-trade  may  have  some  leaning 
toward  the  single  tax,  because  the  latter  by  its  very  terms  pro- 
claims free-trade;  but  "whatever  we  may  think  of  the  economic 
justification  of  import  duties,  it  must  be  recognized  that  they  may 
sometimes  form  an  important  political  weapon."  We  could  not, 
under  the  single-tax  system,  tax  state  bank-notes  out  of  circula- 
tion, nor  levy  a  high  tax  on  opium  to  discourage  its  consumption, 
nor  tax  oleomargarine  "to  ensure  the  purity  of  butter,"  nor  deal 
with  the  drink  question  through  the  imposition  of  high  licenses. 
This  "salutary  power"  of  regulation  would  be  entirely  taken  away 
by  the  single  tax.  Moreover,  its  imposition  would  take  away 
"from  the  vast  majority  of  citizens  the  sense  of  their  obligation 
to  the  government,"  would  "divorce  their  economic  interests  from 
those  of  the  state" ;  for  the  "unearned  increment"  flowing  silently 
and  noiselessly  into  the  treasury  would  do  away  with  the  need  of 
a  budget,  and  thus  diminish  perceptibly  the  citizens'  sense  of  re- 
sponsibility. The  contest  against  unjust  taxation  has  been  in  inti- 
mate relation  with  liberty ;  England's  constitutional  history,  the 
American  Revolution,  the  French  Revolution,  all  attest  the  prim- 
acy of  tax  questions  in  the  stru g^les  of  the  people.  [It  must  be 
conceded  that  Seligman  presents  here  a  curious  contradiction,  and 
makes  curious  assumptions.  Either  the  assumed  noiseless  work- 
ing of  the  single  tax  and  its  consequent  diminishing  of  the  sense 
of  responsibility  would  take  place  because  it  would  work  well 
and  thereby  satisfy  the  popular  sense  of  justice,  or  because  it 
would  work  ill  and  thereby  enually  satisfy  the  people's  sense  of 
justice.  Therefore  the  people's  sense  of  justice  would  be  indif- 
ferent to  the  well  or  ill  working  of  the  tax ;  therefore  the  people 
have  no  sense  of  justice  responsive  to  the  well  or  ill  working  of 


360  HERTIG    ON    TAXATION. 

« 
/ 

a  tax ;  therefore  the  professor  must  rely  on  some  unnamed  tcrtium 
quid  for  having  historically  stirred  the  people  to  take  up  arms 
against  unjust  taxation!  If,  however,  the  professor  has  assumed 
that  a  tax  system  that  will  keep  the  people  on  edge  all  the  time 
affords  the  true  measure  for  tax  reform,  I  submit  that  he  ought  to 
champion  rather^than  oppose  the  single  tax.] 

In  arraigning  and  trying  the  single  tax  for  moral  defects, 
Seligman  easily  proves  his  case.  -I  do  not  think  it  necessary  to 
set  forth  his  facts  and  his  reasons.  Property  in  land  has  as  fully 
the  sanction  of  the  social  consciousness  as  property  in  anything 
else.  That  is  a  fact  which  we  shall  not  get  back  of,  nor  get  rid 
of.  We  may  curse  with  Rousseau  the  rogue  who  first  staked  off 
a  piece  of  ground  and  called  it  his  own ;  we  may  trace  after  a 
fashion  the  evolution  of  the  sentiment  and  with  it  of  the  legal  doc- 
trine that  it  is  right  and  of  right  for  land  to  go  to  a  man  and  his 
heirs  forever ;  we  may  bewail  the  contradiction  between  sophisti- 
cated conscience  and  natural  right ;  we  may,  and  in  so  far  as  we 
try,  surely  will,  make  some  enthusiastic  converts  to  the  view  that 
land  ought  never  to  have  been  appropriated,  and  ought  now  to  be 
expropriated ;  but  we  shall  never  very  seriously  lessen  poverty  by 
our  progress  alone  such  lines.  The  big  land-owner  and  the  little 
land-owner  present  a  united  front  as  to  their  vested  rights  in  land  ; 
and  the  social  consciousness  of  which  they  control  a  very  in- 
fluential part  will  hold  with  them  that  property  in  land  is  entitled 
to  substantially  the  same  protection  as  other  property.  For  the 
rest,  loose  capital  is  as  .vital,  to  the  working  of  land,  or  nearlv  so. 
as  is  the  land  itself.  Who  has  not  in  the  newer  settlements  of  the 
United  States  seen  capital  able  to  command  a  high  rent  for  its 
land  by  furnishing"  the  seed  and  farm  implements,  while  free  land 
hard  by  remained  untilled?  Moreover,  land,  while  fixed  in  site 
and  limited  in  quantity,  is  virtually  as  fluid  a  property  as  any 
other.  Whoever  commands  money,  credit  or  other  forms  of  loose 
capital  has  a  lien  to  that  extent  on  all  the  land  there  is  whether 
land  may  be  acquired  for  private  ownership,  as  under  the  present 
svstem,  or  only  for  tenure  under  the  state  as  contemplated  by  the 
George  system.  Whence  it  follows  that  a  new  distribution  of 
opportunities  to  occupy  land,  would  soon  be  marked  with  the  old 
iniquities  in  land-holding.  The  unregulated  opportunities  of  capi- 
tal would  act  as  a  flux  on  the  new  land-holdings,  and  melt  them 
down,  so  to  speak,  into  matter  circulating  freely  in  the  old  chan- 
nels of  capital  and  opportunity,  with  little  scourine  awav  of  the 
old  shoals  of  iniquity.  Hence  the  land-owner  is  rieht  in  claimine 
that  there  is  neither  eood  sense  nor  eood  morals  in  discriminating 
against  his  landed  propertv.  The  Georgian  system  would  sacri- 
fice the  land  to  paternalism,  and  at  that  price  purchase  unlimited 


HERTIG    ON    TAXATION.  361 

individualism  for  all  other  properties.  George  himself  wrote:  \ 
"The  sphere  of  government  begins  where  the  freedom  of  com- 
petition ends,  since  in  no  other  way  can  equal  liberty  be  assured. 
But  within  this  line  I  have  always  opposed  governmental  inter- 
ference. I  have  been  an  active,  consistent  and  absolute  free- 
trader, and  an  opponent  of  all  schemes  that  would  limit  the  free- 
dom of  the  individual.  I  have  opposed  every  proposition  to  help 
the  poor  at  the  expense  of  the  rich.  I  have  always  insisted  that 
no  man  should  be  taxed  because  of  his  wealth,  and  that  no  mat- 
ter how  many  millions  a  man  might  rightfully  get,  society  should 
leave  to  him  every  penny  of  them." — A  Perplexed  Philosopher, 
p.  92.  The  New  Zealanders  showed  vastly  more  practical  wis- 
dom; they  recognized,  and  rightly,  that  just  because  of  his  wealth 
a  man  should  be  taxed ;  that  not  all  land  but  some  land  should  be 
placed  by  means  of  the  graduated  tax  within  easy  reach  of  state 
ownership.  And  it  might  as  well  be  formally  recognized  every- 
where that  the  owner  of  property  holds  it  in  trust  for  the  people ; 
that  if  he  handles  it  as  a  discreet  trustee  with  a  sense  of  his  re- 
sponsibility, the  state  will,  as  it  ought  to,  continue  him  in  his 
trusteeship ;  that  such  responsible  trusteeship  is  the  sole  atonement 
which  the  owners  of  large  fortunes  can  make  for  the  possession 
thereof,  whether  theft,  thrift,  or  sheer  good  luck  contributed  most 
to  their  riches.  Responsible .  trusteeship  must  be  guided  by  en- 
lightened social  consciousness,  and  yield  to  it  as  readily  as  an  Eng- 
lish ministry  does  to  an  adverse  vote  calling  for  surrender  of  of- 
fice. The  Civil  Nation  shall  be  the  organ,  and  the  New  Juris- 
prudence the  sanction,  of  the  right  social  consciousness. 

Under  the  heading  of  economic  defects,  Seligman  considers 
the  single  tax  from  three  points  of  view, — how  it  would  work  on 
poor  and  new  communities,  how  it  would  work  "on  farmers  and 
the  agricultural  interests  in  general,"  and  how  it  would  work  on 
rich  communities.  He  somewhat  overstates  the  case  against  the  ' 
single  tax  in  its  application  to  new  communities.  It  is  not  true 
that  "land  can  be  secured  by  any  one  on  the  payment  of  a  merely 
nominal  sum,"  when  he  "goes  to  the  virgin  soil  of  the  Northwest 
and  stakes  out  his  farm."  Land  has  been  in  many  new  communi- 
ties very  cheap,  but  never  at  a  merely  nominal  price,  at  least  after 
taxation  had  been  fairly  launched.  Land  speculators  in  some  con- 
fidential relation  to  railroads  have  often  obtained  at  nominal 
prices,  considerable  bodies  of  lands  embraced  in  grants  to  rail- 
roads, and  even  enjoyed,  by  crafty  device,  the  same  immunity 
from  taxation  that  the  railroads  had.  But  the  actual  settler  on 
virgin  soil  soon  finds  out  after  getting  title  to  his  farm,  that  its 
value  is  much  more  than  nominal  on  the  assessor's  roll.  This  is 
especially  true  in  new  communities  through  which  railroads  pass. 


b62  HERTIG    ON    TAXATION. 

Many  a  farm,  for  instance,  within  forty  miles  of  the  Northern 
Pacific  railroad  cost  the  first  owner  $2.50  per  acre  in  payment  of 
the  land  to  the  United  States,  besides  fees  and  expenses.  A  man 
"filed"  under  the  homestead  act  on  a  good  quarter  section  in  the 
"big  bend"  of  the  Sheyenne  river,  in  what  is  now  the  state  of 
North  Dakota.  By  residence  and  improvement  for  a  period  of 
five  years  he  could  have  got  title  from  the  United  States  free  of 
cost  except  a  moderate  "proving-up"  fee ;  but  the  imperative  ne- 
cessity for  capital  at  any  price — no  city  doctrinaire  can  realize  the 
hardship,  the  almost  insuperable  difficulty,  of  making  a  farm  with- 
out capital  or  credit — impelled  this  man  to  negotiate  a  loan  of 
$800.00,  secured  by  a  mortgage  on  his  farm.  To  so  mortgage 
he  had  first  to  commute  his  homestead  and  pay  the  government 
$400.00  for  anticipating  the  title  which  he  could  otherwise  have 
got  free  at  the  end  of  five  years'  residence.  He  had  also  to  pay 
the  costs  of  proving  up  and  a  commission  of  five  per  cent,  on  the 
face  of  the  loan  to  the  agent  who  procured  it  for  him.  When  the 
whole  transaction  was  completed  he  had  $300.00  in  money,  and 
there  was  a  mortgage  of  $800.00  bearing  ten  per  cent,  interest  on 
his  commuted  homestead,  which  was  now  also  duly  listed  for 
taxation,  as  it  could  not  have"  been  while  title  to  the  fee  was  in  the 
government.  I  have  thus  vouched  with  an  instance  from  real 
life  and  with  a  "human  document"  how  far  from  the  truth  is  often 
the  notion  that  in  new  communities  the  soil  is  of  only  nominal 
value.  A  newly  settled  country  may  enjoy  a  "boom"  of  consider- 
able proportions,  after  which  the  price  of  lands  may  be  very  low 
indeed,  considerably  lower  than  their  assessed  value ;  but  owners 
generally  pay  the  high  taxes  on  them  in  the  hope  of  a  rise  in 
actual  values  after  the  dull  times  shall  have  passed.  At  the  same 
time,  while  Seligman  overstates  the  conditions  in  new  communi- 
ties in  saying  "there  is  practically  no  land  value,"  and  that  "a  tax 
on  the  land  values  would  be  lamentably  inadequate,"  we  may  well 
agree  with  him  that  the  single  tax  in  new  communities  would 
strikingly  show  its  economic  defects.  Taxes  there  are  almost  in- 
variably high,  and  soon  confiscate  unimproved  lands  without  the 
aid  of  the  single  tax.  But  the  confiscation  is  not  at  once  appar- 
ent, and  so  the  owners  pay,  or  the  tax-title  man  buys,  and  the 
state  gets  its  revenue,  which  it  could  hardly  do  if  the  tax  for 
each  year  were  twice  or  thrice  as  high.  The  figures  which  Selig- 
man quotes  from  the  census  of  1890,  make  a  special  case  against 
the  single  tax  for  that  time  and  for  the  states  he  mentions, — Mon- 
tana with  58  millions  assessed  personalty  and  55  millions  assessed 
realty,  Wyoming  with  20  millions  of  personalty  and  13  millions 
of  realty,  New  Mexico  with  28  as  against  15  millions,  Arizona 
with  18  as  against  10  millions — the  assessed  aggregate  values  of 


HERTIG    ON    TAXATION.  363 

personalty  and  realty  respectively.  In  a  rancher's  county,  for 
instance,  where  the  land  mostly  belongs  to  the  United  States,  and 
the  taxable  property  is  nearly  all  live  stock,  the  single  tax  would 
not  do  at  all — unless  it  be  taken  as  a  fact  that  almost  no  revenue 
is  needed  there. 

Seligman  is  more  at  ease  in  pointing  out  the  economic  defects 
of  the  single  tax  in  relation  to  poor  communities,  that  is  to  com- 
munities where  the  lands  and  the  population  are  mostly  agricul- 
tural. He  cites  the  testimony  of  one  of  the  single-taxers  before 
the  Massachusetts  tax  commission.  Asked  "how  will  it  be  pos- 
sible for  this  poor  town,  in  which  there  is  very  little  land  value 
to  raise  its  taxes  ? — the  witness  was  compelled  to  reply  that  it 
would  be  impossible  for  the  community  to  do  so,  and  he  suggested 
that  the  expenses  of  the  poor  communities  should  be  defrayed 
in  large  part  from  the  revenues  of  the  rich  communities."  Selig- 
man concludes  justly  that  "if  the  single  tax  is  unable  to  defray 
even  the  local  expenses  of  a  poor  community,  not  to  speak  of  that 
community's  share  of  general  state  or  federal  expenses,  it  is  clearly 
beyond  the  realm  of  practical  politics." 

He  is  equally  correct  in  pointing  out  its  economic  defects  in 
relation  to  rich  communities.  The  single  tax  would  exempt  im- 
provements on  the,  land  in  city  and  country  alike.  But  the  wealth 
represented  by  improvements  on  city  land  is  relatively  much 
greater  than  that  represented  by  improvements  on  country  land. 
In  the  state  of  Pennsylvania,  for  instance,  we  can  readily  see  how 
the  single  tax  would  favor  the  city  as  against  the  country.  "The 
proportion  of  land  values  to  total  valuation  of  all  [real]  prop- 
erty is  in  the  [city]  county  of  Philadelphia,  thirty-six  per  cent. ; 
in  the  agricultural  counties  of  Sullivan  and  Greene,  eighty-one 
per  cent,  and  seventy-five  per  cent.,  respectively."  Thus,  if  for 
state  and  federal  purposes  the  single  tax  should  be  levied  at  a 
uniform  rate  throughout  the  state  it  would  exempt  relatively 
much  more  wealth  in  the  cities  than  in  the  country.  This  would 
hold  good  in  any  state,  if  the  same  rate  of  tax  were  levied  on  the 
bare  land  values  in  both  city  and  country :  the  percentage  of  im- 
provements on  city  land  is  always  more  than  on  country  land 
"If,  therefore,  all  improvements  were  to  be  entirely  exempted,- 
the  only  result  of  a  tax  on  land  values  would  be  to  make  the 
farmers  pay  more  than  they  do  at  present."  [Strictly  speaking, 
this  conclusion  which  Seligman  draws  from  his  facts  does  not 
militate  against  the  single  tax  as  the  same  is  usually  conceived 
by  the  disciples  of  George.  It  would  follow  from  their  conception 
that,  under  the  single  tax,  the  state  would  anyway  become,  or 
nearly  so,  the  universal  landlord  ;  in  which  case  it  would  further 
follow,  and  for  the  single-taxers  ingloriously,  that  the  state  would 


364  HERTIG    ON     TAXATION. 

get  what  rent  it  could  with  practically  little  or  no  regard  for  uni- 
form rates.  Hence,  the  preliminary  effect  of  the  single  tax  as 
between  city  and  country  would  be  of  minor  importance,  though 
no  doubt  the  country  lands  would  be  the  first  to  succumb  to  the 
single-tax  confiscation,  always  supposing  the  system  to  be  in 
operation  long  enough  to  register  its  logically  necessary  results. 
Of  course,  to  those  single-taxers  who,  like  Isaac  Sherman,  do  not 
believe  the  single  tax  would  confiscate  land  values,  Seligman's 
argument  must  needs  give  pause.] 

Finally,  Seligman  shows  the  economic  defects  of  the  single 
tax  in  its  application  to  rich  urban  communities.  It  would  abolish 
there  the  tax  on  houses,  since  buildings  of  some  kind,  aside  from 
the  mains  and  wires  of  public  service  companies  are  substantially 
all  the  improvements  that  there  are  to  exempt  on  city  lands.  But 
vacant  lots  would  not  be  built  over  as  if  by  magic,  nor  rents  fall, 
nor  the  wages  of  workmen  rise,  nor  a  period  of  general  prosperity 
be  ushered  in.  There  is  no  fund  floating  about  in  the  air  to  be 
condensed  into  houses  by  the  imposition  of  the  single  tax.  "The 
amount  of  loanable  capital  in  the  money  market  at  any  one  time  is 
definitely  fixed."  [The  sentence  just  quoted  is  grossly  mislead- 
ing. There  is,  of  course,  an  ultimate  quantitative  limit  to  the 
"amount  of  loanable  capital" ;  but,  at  no  time  is  the  limit  "defin- 
itely fixed."  It  is  nearest  to  the  fixed  point  in  times  of  panic, 
when  money  is  tied  up  by  fear,  credit  paralyzed,  and  loans  are 
made  only  at  usurious  rates,  or,  if  made  through  the  usual  chan- 
nels, are  made  under  pressure  to  avert  failures  that  would  height- 
en the  panic ;  when,  in  short,  there  is  no  money  to  be  had  for 
new  undertakings.  In  ordinary  times,  the  amount  of  loanable 
capital  for  any  special  kind  of  undertaking,  as  house-building  in 
or  near  the  centres  of  capital  and  of  population,  is  limited  only 
by  the  psychological  quality  of  the  lenders  in  relation  to  the  pros- 
pective results  of  the  loans  which  they  can  make.  That  is  to 
say,  opportunities  for  making  tempting  loans  will  be  scarce  be- 
fore the  supply  of  ready  capital  shall  become  low.  Seligman  is 
entirely  right  in  asserting  that  there  would  be  no  magic  in  the 
single  tax  to  cover  vacant  lots  with  houses ;  but  it  is  not  that  capi- 
tal would  ordinarily  be  shut  out  or  be  cut  short  in  such  enter- 
prises by  any  quantitative  limit  of  its  own :  the  psychological 
qualities  of  the  capitalist  would  make  his  class  timid  in  the  out- 
set as  to  investments  in  houses  on  a  single-tax  basis ;  hence  .money 
for  house-building  would  at  first  be  scarce.  With  confidence  in 
house  loans  and  house  investments  restored,  if  it  should  be, — 
confidence  in  safety  and  confidence  in  prospective  profits, — there 
would  be  abundance  of  capital  for  loans  and  investments.  But 
capital  would  expect  to  pay  the  "economic  rent"  of  the  land  and 


HERTIG    ON    TAXATION.  365 

handsome  profits  to  itself ;  and  if  it  should  so  pay,  the  funds  for 
such  payments  must  first  come  out  of  the  tenants'  pockets,  just 
as  they  do  now.  Where,  then,  would  any  special  advantage  come 
in  for  the  tenant  and  the  workman?  Manifestly  none.] 

On  the  special  point  of  the  single  tax  in  relation  to  the  rents 
of  the  tenement-house  population,  Seligman  puts  forth  amongst 
others  the  all-sufficient  consideration,  as  it  seems  to  me,  that  "the 
only  result,  in  this  direction,  of  the  single  tax  would  be,  as  a 
matter  of  fact,  that  people  would  pay  their  rent  to  the  state  in- 
stead of  to  private  individuals."  [This  states  the  form  of  the  re- 
sult correctly  enough;  but  the  net  result  might  well  be  much 
worse  than  it  is  at  present.  With  all  the  greed,  that  is  now  sub- 
divided and  flowing  in  multiple  tax  channels,  concentrated  into 
one  such  channel — how  should  the  state  escape  being  a  greedy 
landlord  ?] 

"Finally,"  continues  Seligman,  "we  may  ask  how  the  wages  of 
the  workman  are  to  be  increased  by  the  single  tax.  Wages  can 
be  increased  only  through  an  increase  of  capital  or  through  an 
increase  of  the  efficiency  of  the  laborer.  [The  argument  in  no 
wise  stands  or  falls  with  the  questionable  proposition  in  abstract 
economics  laid  down  in  the  preceding  sentence.]  Taxation  in 
itself  cannot  accomplish  either  of  these  results.  [Certainly  not 
"in  itself" ;  but  the  right  of  taxation,  under  the  right  statesman- 
ship, is  a  potent  means  for  changing,  and  creating  opportunity, 
and  for  keeping  open  the  channels  of  opportunity.]  To  turn 
economic  rent  over  to  the  state  cannot  increase  capital  one  whit, 
nor  can  it  augment  the  efficiency  of  the  laborer.  [This  is  true  in 
application  to  the  revenues  derived  from  any  tax  system  that  does 
not  propose  to  depart  from  present  aims  and  methods  in  the  distri- 
bution of  such  revenues ;  but  it  does  not  thence  follow  that  a  new 
and  bungling  tax  system  would  not  decrease  capital  and  diminish 
the  efficiency  of  the  laborer.]  Not  only  can  the  single  tax  have  no 
influence  on  the  wages  of  labor,  but  as  we  have  seen  it  cannot 
decrease  the  rentals  of  the  tenement-house  population.  The 
whole  dream  of  economic  felicity  thus  resolves  itself  into  mere 
mist,  into  mere  nothingness ;  the  tenement-house  population 
would  derive  as  little  advantage  as  the  American  farmer  from  the 
single  tax."  [I  quite  agree  with  Seligman's  general  conclusion, 
though  freely  criticising  his  argument  in  detail.  I  see  no  positive 
element  in  George's  single-tax  system,  that  would  even  tend  to 
benefit  anybody,  if  the  system  were  adopted,  put  in  force,  and  kept 
so  over  a  considerable  territory.  I  conceive,  however,  that  if  a 
single-tax  principality,  so  to  speak,  of  quite  limited  area,  could  be 
erected  in  some  choice  locality  in  the  United  States  and  enjoy 
free  trade  with  our  country  throughout  its  extent, — then  such 


366  HERTIG    ON     TAXATION. 

principality,  under  the  single-tax  system,  might  become  enor- 
mously prosperous,  as  a  port  of  refuge  against  the  taxation  of 
personal  property.  Immense  amounts  of  floating  capital,  huge 
stocks  of  merchandise,  all  manner  of  articles  of  luxury  and  staple 
need,  would  be  gathered  there,  and  go  thence  untaxed  into  out- 
side channels  of  trade.  Tax-dodging  persons  of  wealth  would 
reside  there,  do  their  utmost  to  make  it  the  Plutopolis  of  America. 
Economic  rent  might  soar  above  the  needs  of  taxation,  and  much 
of  it  remain  where  it  does  now,  in  the  pockets  of  the  private  own- 
ers. But  this  supposed  prosperity  would  be  entirely  due  to  special 
advantage  and  special  privilege, — to  the  toleration  of  the  United 
States,  as  the  prosperity  of  the  bank  at  Monte  Carlo  is  due  to  the 
like  sort  of  toleration,  it  paying  in  fact  all  the  taxes  of  the  princi- 
pality of  Monaco.] 

The  true  significance  of  the  single-tax  movement  lies  in  the 
evidence  which  it  has  furnished  of  the  wide-spread  discontent 
with  present  social  conditions,  in  its  making  the  people  familiar 
with  the  notion  of  taxation  as  an  engine  of  social  reform,  in  its 
contribution  to  the  overthrow  of  the  old  political  economy  by 
carrying  some  propositions  thereof  a  stretch  further  than  the 
professors  dared  to  do.  As  Thorold  Rogers,  a  distinguished 
English  economist,  said,  George's  theory  "is  entirely  the  outcome 
of  economic  fallacies  hitherto  treated  as  indisputable  truths."  His 
disciples  should  now  modify  their  master's  theory ;  for  Henry 
George  builded  better  than  he  knew,  very  different  from  what  he 
thought  he. knew.  But  his  memory  deserves  none  the  less  their 
affectionate  regord,  and  his  efforts  kindly  appreciation  in  the 
hearts  of  any  friends  of  the  people. 


CHAPTER  XIX. 


The  general  property  tax  divided  against  itself.— Break-down  of  the 
ad  valorem  tax  on  personal  property. — New  York,  Wisconsin,  Indi- 
ana, Ohio,  Kansas,  North  and  South  Dakota,  Washington,  Tennes- 
see,— Farm  taxes  on  an  income  basis. — Two  golden  rules  of  taxation. 
— Tax-dodging  in  Connecticut. — The  Civil  War  income  tax. — Needed 
Amendment  of  Federal  Constitution. — Income  tax  popular  with  the 
British  masses. — Its  origin  and  results  in  Great  Britain. — The  so- 
called  "unit  rule"  violates  income-tax  principle. — Chicago  corpora- 
tions and  the  unit  rule  in  the  circuit  court  of  the  United  States. 


My  address  to  the  tax  committee  of  the  Minnesota  House  and 
a  miscellaneous  audience,  on  February  Hth,  was  perhaps  the 
most  elaborate  of  any  made  in  the  course  of  the  numerous  hear- 
ings on  taxation  at  the  special  session  of  1902.  Having  had 
throughout  this  book  the  advantage  of  a  different  form  of  ex- 
pression, I  have  not  herein  needed  to  reproduce  that  speech ;  ajid 
on  account  of  its  being  unwritten,  I  could  not  in  any  event  give 
more  than  its  substance.  I  criticised  many  features  of  the  general 
property  tax,  and  particularly  the  form  of  its  personal  property 
features  as  set  forth  in  the  tax  commission's  proposed  code,  criti- 
cised and  killed  as  more  fully  set  forth  in  previous  chapters.  I 
did  not,  however,  advocate  the  entire  abandonment  of  the  personal 
property  tax  as  a  tax  on  the  capital  value  or  sunken 
capital  value  of  such  property.  Personal  property  in  its' 
more  tangible  forms,  may  be  assessed  and  taxed  as 
readily  as  real  estate;  and,  with  exemptions  authorized  in 
some  of  the  states  ($200.00  permitted  by  Minnesota's  present  con- 
stitution, $300.00  by  proposed  amendment),  and  particularly  with 
the  present  easy  practice  of  assessors,  such  assessment  and  taxa- 
tion of  tangible  personal  property  will  occasion  little  inconveni- 
ence, whatever  may  be  the  other  features  of  any  tax  system  of 
which  such  assessment  and  taxation  form  part.  But  the  partial — 
one  may  say  practically  the  complete — breakdown  of  the  general 


368  HERTIG    ON    TAXATION. 

property  tax  is  inevitable  whenever  it  attempts  to  tax  the  capital 
value  of  moneys,  credits  and  other  easily  hidden  personalty.  In 
such  case  the  tax  law  becomes  at  once  divided  against  itself ;  it 
virtually  avows,  with  its,  let  us  say  average  three  per  cent,  rate, 
that  it  will  confiscate  moneys  and  credits ;  it  disavows,  with  the 
same  rate,  that  it  will  confiscate  realty  and  visible  personalty.  It 
abides,  in  general  practice,  by  its  avowals  and  disavowals, — con- 
fiscating moneys,  credits,  etc.,  by  a  face  valuation,  and  sparing 
realty  and  visible  personalty  by  a  much  lower  valuation.  It  is 
useless  to  mince  matters :  human  nature  will  not,  and  ought  not, 
submit  to  paying,  by  way  of  a  tax,  three  or  more  per  cent,  on 
mortgages  according  to  their  face  value,  when,  by  investing  in 
land,  or  otherwise,  the  capital  represented  by  the  mortgages,  the 
tax  would  be  a  third  or  less  than  a  third  of  the  mortgage  tax. 
To  say,  as  is  often  said,  that  if  all  were  honest,  and  if  all  would 
consent,  or  were  forced  to  be  taxed  on  their  invisible  property, 
there  would  be  such  a  lowering  of  rates  that  no  hardship  would 
be  felt  by  anybody, — is  the  most  barren  of  propositions.  To  con- 
clude thence  that  the  way  to  tax  reform  lies  through  drastic  laws 
to  reach  invisible  property  and  equalize  assessed  values  is  to  en- 
graft on  barren  theory  still  more  barren  action.  The  average 
human  nature  of  taxpayer  and  tax-dodger  makes  no  such  mistake. 

In  Illinois  and  Iowa,  they  are  now  trying  to  get  substantial 
uniformity  of  valuations  by  taking,  in  the  former  state  20,  and  in 
the  latter  25,  per  cent,  of  the  "true  cash  value"  as  the  taxable 
value.  Mention  has  been  made  in  chapter  XIIL,  above,  of  the 
effect  of  such  law  on  real  estate  assessments  in  Iowa.  I  have  re- 
cently procured  a  special  report  in  this  matter  from  an  Iowa  ex- 
pert, which  more  than  confirms  my  conclusion  as  stated  in  that 
chapter.  "It  is  true,"  he  says,  "that  the  assessed  value  of  the  real 
property  of  the  state  of  Iowa  does  not  exceed  18  per  cent,  of  its 
real  value,  and  the  percentage  of  personal  property  a  little  less.-  I 
am  not  now  including  the  personal  property  which  escapes  taxa- 
tion altogether  by  concealment,  but  confine  myself  to  the  property 
at  its  actual  value  upon  the  assessment  rolls."  Hence,  even  in  Iowa 
there  would  be  a  differential  of  about  33  per  cent,  in  favor  of  the 
owner  of  ordinary  personal  property  as  against  the 
owner  of  moneys  and  credits;  for  each  $1,000  worth  of  ordinary 
or  average  personal  property  would  be  assessed  at  $170.00  or  a 
little  less,  while  moneys  and  credits,  taken  at  their  face  would  be 
assessed  at  $250.00  for  the  same  actual  value. 

Here  is  an  example  of  the  differential  in  favor  of  real  estate 
as  against  "moneyed  capital,"  both  being  under  one  ownership, 
and  the  figures  taken  from  an  actual  tax-paying  experience  in 
Minnesota.  Mention  has  been  already  made  of  the  rule  adopted 


HERTIG    ON    TAXATION.  869 

by  the  Minnesota  board  of  equalization  for  .assessing  shares  in 
banks,  whereby  after  deducting  the  bank's  real  estate  from  capital, 
surplus  and  undivided  profits,  the  shares  are  assessed  as  personal 
property  of  the  value  of  50  per  cent,  of  the  remainder.  An  in- 
corporated bank  in  Minnesota  had  invested  $31,000  of  its  capital 
in  an  office  building,  on  which  for  five  years,  1893-1897  inclusive, 
it  paid  taxes  separately,  like  any  individual  real  estate  owner,  to 
the  average  annual  amount  of  $329.00.  Its  average  capital  for 
these  five  years  not  invested  in  real  estate  was  $67,000.  Yet  on 
such  remainder  of  its  moneyed  capital  it  paid  for  said  five  years 
an  average  annual  tax  of  $1,276.00.  In  other  words  that  part 
of  its  capital  that  was  invested  in  real  estate  paid  an  average  an- 
nual tax  just  rising  one  per  cent.,  while  the  part  not  in  real  estate 
paid  an  average  annual  tax 'just  under  two  per  cent.  Such  are 
the  equality  and  uniformity  of  taxes  as  guaranteed  by  American 
constitutions !  Such  the  "enforced  proportional  contributions" 
of  the  Maine  Judges,  of  Justice  Cooley,  of  the  Century  Diction- 
ary. 

Before  me  are  the  figures  which  I  used  in  said  address  to  illus- 
trate the  breakdown  of  the  personal  property  tax.  They  all  tell 
substantially  the  same  story.  The  state  board  of  equalization  in 
New  York  be^an  to  be  in  1859,  when  personal  property  was  as- 
sessed at  not  quite  25  per  cent,  of  the  aggregate  of  the  total  values 
of  realty  and  personalty.  In  twenty  years,  1879,  the  assessed 
values  for  the  whole  state  were : 

Real  estate  . $2,333,669,813 

Personal  property 352,469^320 

In  said  twenty  years  assessed  values  of  real  estate  had  more 
than  doubled,  while  values  of  personalty  had  increased  less  than 
one-sixth.  In  ten  years  more,  1889,  the  figures  stood : 

Real  estate $3,213,171,201 

Personal  property 354,258,556 

In  1901 : 

Real  estate $5,093,025,771 

Personal  property 593-895,907 

It  is  common  knowledge  that  the  personal  property  in  New 
York  state  increased  much  more  rapidly  than  real  estate  there ; 
yet  now  personal  property  represents  but  a  trifle  more  than  ten 
per  cent,  of  aggregate  assessed  values,  while  the  new  and  com- 
paratively poor  states  of  North  Dakota  and  South  Dakota  show 
for  the  year  1900  respectively  personal  property  valuations  of  26 
and  25  per  cent,  of  their  combined  valuations  of  realty  and  per- 
sonalty. 

Nothing  illustrates  more  strikingly  the  break-down  of  personal 
property  taxes  in  the  rich  state  nf  New  York  than  the  pointing 


370  HERTIG    ON    TAXATION. 

out  of  special  instances  thereof  in  particular  localities, — for  in- 
stance, in  Erie  county,  where,  in  1901,  the  aggregate  assessed 
value  of  the  realty  was  $277,307,745  ;  and  of  personalty,  $9,981,- 
125.  •  That  is  to  say,  where  the  personalty  value  was  less  than 
four  per  cent,  of  the  whole !  Nothing  more  strikingly  marks  a 
lost  cause  than  the  joyous  shouts  of  its  adherents  over  an  insig- 
nificant victory.  Thus,  in  Greene's  Annotated1  Ta.r  Law  of  the 
state  of  New  York  (second  ed.  Albany,  1901),  p.  265,  the  board 
of  supervisors  of  Washington  county  is  commended  for  "the 
vigorous  measures  taken  in  that  county  to  effect  a  proper  enforce- 
ment of  the  law."  But  what  did  these  "vigorous  measures"  ef- 
fect? Easily  told  :  the  local  assessors,  in  1895,  "increased  the  as- 
sessment of  real  estate  in  that  county  over- the  assessment  of  1894 
by  $1,989,976,  or  from  nearly  fifteen  and  one-half  millions  to 
nearly  seventeen  and  one-half  millions ;  and  they  added,  speaking 
roundly,  one  million  dollars  to  the  personal  property  assessment, 
— made  it  $3,461,766  instead  of  $2,448,790.  In  percentage  fig- 
ures, they  raised  the  realty  by  13  per  cent,  and  the  personalty  bv 
41  per  cent.  This  sounds  well ;  but  the  halo  of  it  is  shrouded  in 
mist,  when  one  makes  the  simple  calculation  that  after  the  raise, 
the  aggregate  value  of  personalty  was  only  16  2-3  per  cent,  of 
the  whole ! — a  little  more  than  three  per  cent,  less  than  was  the 
percentaee  of  personalty  to  combined  realty  and  personalty  in 
"poor  bleeding  Kansas"  in  1900.  The  percentage  of  personalty 
values  in  Kansas  that  year  was  a  little  over  20  per  cent.  Of  how 
little  ultimate  avail  was  the  lauded  victory  in  Washington  coun- 
ty, New  York,  is  apparent  from  a  late  report  of  the  comptroller 
of  the  state  (Albany,  1902,  p.  736),  making  Washington  county  a 
backslider  in  these  figures: 

Assessed  values  of  her  realty $16,083,302 

Assessed  values  of  her  personalty 1,840,790 

That  is  to  say,  personalty  less  than  10  per  cent,  of  the  whole ! 

Wisconsin  has  a  tax  system  not  unlike  that  of  Minnesota, 
but  the  former  state  differs  from  Minnesota  in  that  the  Wiscon- 
sin "owner  of  moneys,  notes,  morterap"es  or  other  credits  or  secur- 
ities" must  make  iron-clad  oath  to  the  correctness  of  his  list ;  and 
I  have  already  described  the  facetious  law  in  Wisconsin  that  for- 
bids the  assessor  from  recantine  under  oath  what  he  has  once 
officially  sworn  to. — Chapter  XTV.,  above.  The  Wisconsin  tax 
commission  complains,  however,  that  "no  penalty  is  imposed  for 
failure  to  make  such  [sworn  1  statement,  and  ordinarily  it  is  not 
made." — Report,  p.  25.  A  first  examination  of  the  Wisconsin 
code  led  me  to  believe  that  so  far  as  oaths  JTO  that  code  is  quite 
ri^id,  and  that  from  their  failure  to  be  at  all  efficient,  the  vanity 
of  the  numerous  oaths  in  the  buried  code  of  the  Minnesota  tax 


HERTIG    ON    TAXATION.  371 

commission  could  be  argued  without  going  further.  The  easiest 
way  to  circumvent  an  oath  is  to  avoid  making  it.  That  way  is 
taken  when  the  taking  of  it  involves  no  penalty ;  when  such  way 
is  closed,  a  little  practice  in  perjury  makes  another  way  of  nearly 
equal  smoothness  and  leading  to  the  same  end.  For  the  rest, 
Minnesota  and  Wisconsin  tax  about  the  same  percentage  of  per- 
sonalty. In  1898,  the  total  values  of  Wisconsin  realty  and  per- 
sonalty were  $628,504,011,  of  which  $108,513,489,  or  a  little  over 
17  per  cent,  of  the  whole,  was  personalty.  These  were  the  values 
as  returned  by  local  assessors ;  but  the  state  board  of  Wisconsin 
changed  the  figures  somewhat,  making  the  aggregate  values  of 
realty  and  personalty  for  the  state  even  $600,000,000,  of  which 
sum  personalty  was  made  to  represent  $117,716,969,  or  a  little 
more  than  19  per  cent,  of  the  whole. 

In  1899,  the  far-off  state  of  Washington  had  of  values  as 
finally  equalized,  the  following: 

Real  estate $172,129,311 

Personal  property 36,507,245 

Which  makes  the  percentage  of  Washington  personalty  17^2 
per  cent. 

Mention  has  been  made  of  the  fact  that  the  Minnesota  tax 
commission  went  to  Indiana  for  many  features  of  their  proposed 
code ;  also  of  the  efforts  made  in  Indiana  to  assess  property  of 
all  kinds  at  the  true  value  thereof. — Chapter  XIII. ,  above.  I 
take  the  following  figures  from  the  report  of  the  state  auditor  of 
Indiana  for  1899,  P-  I2O: 

"Total  true  value  of  taxables"  for  1898 $1,311,508,008 

True  value  of  railroads 153,659,348 

True  value  of  telephone,  telegraph,    express    and 

sleeping  car  properties 5,189,324 


True  value  of  realty  and  personalty .$1,152,659,336 

True  value  of  personal  property 295,032,580 

That  is  to  say,  of  the  a^^re^ate  of  realty  and  personalty  iust 
a  little  more  than  25  per  cent,  represents  personal  property.  But. 
while  I  have  shown  in  Chapter  IX.,  above,  that,  as  in  the  case  of 
Greene  countv.  Pa.,  the  value  of  personal  p^ooerty  in  old  coun- 
ties of  the  strictly  rural  type  is  about  25  per  cent,  of  the  aggre- 
gate true  values  of  realtv  and  personalty  therein, — it  may  be 
safely  assumed  that  in  Indiana  as  a  whole,  where,  in  the  last  de- 
cade of  the  iQth  century,  the  capital  employed  in  manufactures 
alone  leaped  from  $16^.000000  to  $234.000,000,  where  there  are 
many  laree  and  flourishing  towns  and  cities. — the  nersonal  prop- 
ertv  other  than  railroad,  telenhone,  tele^ranh.  express  and  sleep- 
ing car  property  is  worth  *i  le^st  as  much  as  the  realty.  "It  has 


372  HERTIG    ON    TAXATION. 

been  stated  by  many  economists  and  statisticians,  and  generally 
accepted  as  truth  by  others,  that  taxable  personal  property  prob- 
ably exceeds  in  value  the  taxable  real  property  in  all  the  older 
states  and  equals  it  in  the  newer  sections." — Report  of  Wis,  Tax 
Com.  p.  65.  In  any  event,  when  the  lauded  Indiana  system  places 
no  greater  percentage  of  personal  property  on  the  assessment  roll 
than  is  so  placed  in  the  newer  and  poorer  states  of  North  and 
South  Dakota  with  only  the  ordinary  assessment  machinery, — it 
is  apparent  that  Indiana  reaches  little  or  no  more  invisible  per- 
sonal property  than  is  reached  elsewhere,  though,  of  course,  she 
cannot  quite  compete  with  the  state  of  New  York  for  the  banner 
breakdown  of  the  general  property  tax.  In  fine  the  net  effect  of 
strenuous  effort  to  reach  personal  property  for  taxation,  under 
any  of  the  American  systems,  is  to  make  the  countrv  counties  pav 
a  greater  percentage  of  the  state  taxes  than  thev  otherwise  would. 
The  report  of  the  Ohio  tax  commission  made  in  December,  1893, 
is  pretty  nearly  conclusive  on  that  point.  As  one  illustration  in 
point,  the  commission  reached  the  conclusion  that  under  Ohio's 
very  drastic  tax  law,  where  they  employ  special  inauisitors  or 
"ferrets"  to  collect  otherwise  evaded  taxes,  and  pav  them  20  per 
cent,  of  the  amounts  so  collected, — nearlv  half  the  bank  deposits, 
that  is  to  say  $32.000,000  out  of  $70,000,000  in  the  counties  other 
than  the  five  leading  citv  counties,  were  returned  for  taxation, 
but  that  out  of  about  $128000.000  on  deposit  in  said  five  counties 
containing  the  cities  of  Cincinnati,  Toledo,  Cleveland,  Dayton 
and  Columbus,  onlv  the  sum  of  $6,088,096  was  returned  for  taxa- 
tion. "In  the  sprine  of  1802  there  were  on  deposit  in  the  various 
banks  (national,  state,  and  savings)  of  the  city  of  Cleveland  ^bout 
$63.000,000.  Of  this  monev  there  was  returned  for  taxation  in 
that  same  vear  onlv  ST. 800. c;o3  ;  and  about  half  of  this  sum  wqs 
derived  from  the  township  outside  of  fhe  citv." — As  quoted  by 
WFLLS,  Theory  and  Practice  of  Taxation,  42^-426. 

The  commission  further  snvs :  "The  svstem  as  it  is  actuallv 
administered  results  in  debauchin^  the  moral  sense.  It  is  a  scho^ 
of  penury.  It  sends  lar^e  amounts  of  nronertv  into  hiding  Tf 
drives  capital  in  laree  quantities  from  the  state.  Worst  of  all.  if 
imposes  uniust  burdens  upon  various  classes  in  the  communitv : 
upon  the  farmer  in  the  countrv,  all  of  whose  pronertv  is  taxed 
because  it  is  tangible ;  upon  the  man  who  is  scrupulouslv  honest ; 
and  upon  the  prtardian,  executor  and  trustee,  whose  accounts  are 
matters  of  public  record.  These  burdens  are  uniust  because  bv 
the  svstem  as  administered  these  people  pay  the  taxes  which 
should  be  paid  bv  their  neighbors."  And  the  commissioners  for- 
tifv  their  position  bv  addino-  that  "these  conclusions  -^re  in  accord 
with  all  current  authorities  on  the  subject." — Id,  426.  This  com- 


HERTIG    ON    TAXATION.  373 

mission,  appointed  by  William  McKinley  as  governor  of  Ohio, 
had  four  members — two  Republicans  and  two  Democrats. 

The  Wisconsin  tax  commission,  in  mentioning  that  in  their 
"state  the  ratio  of  the  assessed  value  of  personalty  "to  the  total 
assessed  value  of  real  and  personal  property,  is  19.62  per  cent/' 
adds :  "This,  it  may  be  remarked,  is  a  larger  proportion  than  is 
shown  by  many  of  the  states.  The  smallest  proportion  we  find  is 
in  Tennessee  (12.29),  where  they  claim  to  have  made  special  ef- 
forts to  reach  personalty  for  taxation,  and  this  only  emphasizes 
the  facility  with  which  personal  property  eludes  the  utmost  vigi- 
lance of  tax  laws  and  taxing  officers." — Report,  p.  65.  New 
York  for  certain  years,  and  especially  for  certain  localities,  must, 
however,  be  conceded  the  banner  for  evading  personal  property 
taxes, — a  victory  over  Tennessee  all  the  more  decisive  in  view  of 
the  conceded  great  wealth  of  the  "Empire  State." 

1  have  frequently  insisted  upon  ana  illustrated  the  proposition 
that  all  taxes,  in  so  far  as  they  do  not  confiscate,  must  be  income 
taxes  in  substance  whatever  may  be  their  form.  A  further  il- 
lustration of  this  truth  is  furnished  by  the  Wisconsin  tax  com- 
mission. They  sent  out  to  a  large  list  of  "selected  farmers"  a 
schedule  of  inquiries  "calculated  to  discover,"  among  other  things, 
"the  ratio  of  expense  to  gross  income  of  agriculture,"  and  the 
"percentage  of  gross  income  and  of  income  from  operation  the 
farmer  pays  in  taxes."  Out  of  6,000  farmers  thus  questioned  by 
letter  and  written  schedule  about  1,500  replied.  Of  those  reply- 
ing, 954  "were  able  to  make  a  statement  of  gross  earnings  of 
their  farms  and  the  amount  of  taxes  paid  upon  the  assessment 
of  1899.  *  *  *  These  reported  their  gross  earnings  to  be 
$871,351,  of  which  amount  $37,297  was  paid  in  taxes.  Computed 
on  the  percentage  basis  the  954  farmers  representing  64  counties 
paid  4.2  per  cent,  of  their  gross  receipts  in  taxes."  A  smaller 
number,  656,  had  so  kept  their  accounts  as  to  be  able  to  report 
both  their  gross  income  and  their  income  after  expenses  were 
paid, — $687,469  and  $204,152  respectively.  "In  other  words,  the 
ratio  ot  gross  expenses  to  gross  income  was  70.3  per  cent.  The 
taxes  paid  by  these  656  farmers  averaged  13  per  cent,  of  their 
income  from  operation — that  is,  13  per  cent,  of  the  income  remain- 
ing alter  expenses  of  operation  were  paid." — Report,  pp.  56-57. 
Now,  while  it  is  very  probable  that  expert  book-keeping,  had  it 
been  possible  for  these  farmers,  would  not  have  given  the  same 
aggregate  result  as  that  which  was  footed  up  from  their  actual 
figures, — yet,  whether  the  exact  truth  lies  up  or  down  from  the 
result  given,  the  proposition  that  taxes  which  do  not  confiscate  are 
in  effect  income  taxes,  whatever  their  name,  is  alike  confirmed 
and  iliiisl. rated.  Estates  and  trust  funds  are  now  generally  in- 


374  HERTIG    ON    TAXATION. 

vested  in  securities  paying  a  little  less  or  a  little  more  than  four 
pc.-  cent.  If  such  income  be  called  net  income  and  pay  in  taxes 
13  per  cent.,  like  the  Wisconsin  farmers,  the  holder  of  a  security 
bearing  four  per  cent,  per  annum  would  pay  in  taxes,  on  the 
revenue  from  a  thousand  dollars,  $5.20  and  enjoy  free  of  taxes 
the  remaining  $34.80 ;  whereas,  if  taxed  on  its  capital  value,  as  in 
most  of  the  states  and  at  the  rate  therein  prevailing,  the  holder 
would  pay  in  taxes  nearly  all  and,  in  exceptional  cases,  more  than 
all  of  the  annual  revenue  derived  from  such  bond — would  pay, 
that  is,  if  assessed  at  all.  Evasion  of  taxes  under  such  circum- 
stances is  not  only  inevitable,  but  goes  as  far  as  any  extenuating 
circumstance  can  to  make  perjury  justifiable.  When  the  law  and 
its  official  expounders  alike  lie,  alike  flaunt  their  hollow  pretense 
of  equality  and  uniformity,  average  human  nature,  as  exemplified 
in  the  security-holder,  will  not  hesitate  to  follow  the  example  of 
lying  law  and  lying  judges.  A  golden  rule,  then,  of  practical 
taxation  is  that  the  state  must  tax  moneys,  mortgages,  and  other 
"credits"  and  invisible  personalty  on  the  income  basis,  or  else 
practically  not  tax  them  at  all.  But  capital,  under  modern  con- 
ditions, is  very  movable  and  very  liquid.  There  is  absolute  free 
trade  between  the  states  of  the  American  Union ;  business  of  tre- 
mendous magnitude  may  be  carried  on  in  a  given  state  without 
the  taxable  presence  of  the  capital  embarked  in  that  business. 
The  several  states,  in  the  individual  capacity  of  their  citizens,  are 
eager  competitors  in  business  and  desirous  to  attract  within  their 
boundaries  capital  and  the  tangible  instrumentalities  of  commerce. 
They  delight  in  ports  with  a  large  shipping  registry,  delight  m 
mills,  elevators  and  factories.  A  second  golden  rule,  then,  of 
practical  taxation  as  between  competing  states,  is  that  ships,  ele- 
vators and  factories  should  be  subjected  to  a  small  but  certain 
income  or  privilege  tax.  'Compare,  in  this  connection,  the  ob- 
servations in  chapter  XIV.  on  taxing  ships  and  grain ;  and  see 
the  magnificent  revenues  collected  in  Pennsylvania,  all  on  the  in- 
come and  privilege  basis,  as  set  forth  in  chapter  XVII.  of  this 
work. 

A  tax  on  mortgages  cannot  be  evaded  if  levied  in  the  form  of 
a  registry  tax ;  but  as  such  tax  is  in  its  general  effect  a  tax  on 
the  borrower,  it,  if  levied  at  all,  should  be  levied  at  a  very  low 
rate,  say  not  exceeding  one  quarter  of  one  per  cent,  per'  annum. 
So  also  a  tax  on  bank  deposits  may  be  collected,  if  levied  upon  the 
banks  themselves  and  at  a  rate  as  low  as  that  suggested  for  mort- 
gages— both  such  taxes  to  be  in  lieu  of  other  taxes  on  mortgages 
and  deposits.  To  make  taxes  of  the  kind  mentioned  low  and  cer- 
tain is  to  play  the  best  card  for  attracting  and  retaining  capital  in 
the  competition  between  states ;  and  the  revenue  yielded  by  such 


HERTIG    ON    TAXATION.  375 

taxes  would  be  considerable  in  lieu  of  the  present  evaded  taxes 
at  current  rates.  Wells  mentions  the  constantly  diminishing  per- 
centage of  notes,  bonds  and  money  at  interest  found  by  assessors 
in  Connecticut  prior  to  1889.  Though  forming  ten  per  cent,  of 
the  aggregate  valuation  of  that  state  in  1855,  the  percentage  of 
these  items  was,  in  1865,  only  "about  seven  and  one  half  per  cent; 
in  1875  a  little  over  five  per  cent,  and  in  1885  about  three  and 
three-quarters  per  cent. ;  and  yet  during  the  period  covered  by 
these  statistics  it  is  probable  that  the  amount  of  state,  railroad, 
municipal  and  farm-mortgage  bonds  owned  by  the  citizens  of 
Connecticut  increased  to  an  extent  equal  to  at  least  one-half  the 
valuation  of  all  the  other  property  in  the  state  returned  and  made 
subject  to  taxation." — Theory  and  Practice  of  Taxation,  415-16. 
The  reason  was  that  these  items  when  found  were  taxed  at  "from 
one  to  two  or  more  per  cent,"  and  hence  the  inevitable  tax- 
dodging.  "Not  a  bond  was  returned  as  owned  in  the  rich  city 
of  Meriden.  The  twenty  thousand  inhabitants  of  the  thriving 
city  of  Waterbury  managed  to  scrape  together  only  seven  hun- 
dred and  fifty  dollars  in  bonds.  So  far  as  cash  is  concerned, 
there  never  was  a  community  since  mankind  emerged  from  a  state 
of  barter  that  got  along  with  so  little." — Ibid'.  But  when  in  1889 
a  new  law  went  into  effect  making  the  tax  on  notes  and  bonds  one- 
fifth  of  one  per  cent,  per  annum  in  lieu  of  other  state  or  local 
taxation, — the  amount  of  bonds  and  notes  that  owners  registered 
in  five  months  after  the  law  went  into  effect  was  something  over 
$30,000,000,  of  which  the  state  treasurer  said,  "probably  at  least 
three-fourths  have  never  paid  any  taxes  whatsoever."  It  does 
not  by  any  means  follow  that  the  new  law  uncovered  all  the  tax- 
able notes  and  bonds ;  but  its  operation  was  sufficient  to  enforce 
my  point  that  if  these  kinds  of  property  are  to  be  reached  at  all 
in  owners'  hands  it  can  be  only  by  a  specially  low  tax. 

The  specially  low  taxes  which  I  favor  on  the  class  of  prop- 
erties above  mentioned  are,  of  course,  only  another  application 
of  the  income-tax  principle.  At  the  same  time  the  favor  with 
which  the  income  tax  has  come  to  be  looked  upon  in  the  United 
States,  is,  in  some  respects,  rather  a  reaction  against  the  manifold 
shortcomings  of  the  general  property  tax  than  the  outgrowth  of 
opinion  based  on  clear  understanding  of  the  merits  and  difficulties 
of  the  income  tax.  A  word  of  caution  against  over-sanguine  ad- 
vocacy of  the  income  tax  is  entirely  pertinent.  Prof.  R.  T.  Ely 
who  has  clone  much  zealous  and  creditable  work  in  the  cause  of 
tax  reform,  and  who  is  a  friend  to  the  income  tax,  is  justly 
enough  of  the  opinion  that  it  is  more  suitable  for  the  national 
government  than  to  the  several  states.  The  income  tax,  he  says, 
"although  it  has  been  very  frequently  tried,  has  never  worked 


376  HERTIG    ON    TAXATION. 

very  well  in  any  of  our  commonwealths." — Cosmopolitan  Maga- 
zine, XXX.,  307.  But  this  applies  only  to  income  taxes  as 
such  when  attempted  by  the  states  and  in  no  way  derogates  from 
the  proposition  which  I  have  so  frequently  urged,  that  the  states 
in  levying  their  usual  and  familiar,  as  well  as  their  newer,  taxes 
should  always  keep  in  line  with  the  income-tax  principle.  Since 
the  federal  income-tax  act  of  1894  has  been  declared  unconstitu- 
tional, the  government  at  Washington  is  virtually  barred  out  from 
making  an  effective  income-tax  law. 

The  federal  income-tax  law  which  grew  out  of  the  Civil  War, 
and  which  after  numerous  amendments  was  repealed,  and  ceased 
to  be  in  force  in  1872  was  a  fairly  good  revenue  yielder,  but  was 
the  subject  of  much  adverse  criticism.  The  total  collections  un- 
der it  from  September  I,  1862,  the  date  of  the  organization  of 
the  office  of  the  commissioner  of  internal  revenue,  to  the  3Oth  of 
June,  1872,  were : 

From  the  general  income  tax $341,706,036 

From  the  special  income  tax  of  1864 29,381,862 

Of  the  general  income  tax,  there  was  paid : 

By  individuals $260,700,986 

By  banks  as  withheld  from  dividends  and  surplus .  .  .  29,048,443 
By  insurance  companies  as  withheld  from  dividends.  5,680,392 
By  railroad  companies  as  withheld  from  dividends.  .  20,655,808 
By  railroad  companies  as  withheld  from  interest  on 

bonds 9,852,202 

By  United  States  as  withheld  from  salaries 13,772,062 

I  take  these  figures  from  the  report  of  the  commissioner  of  in- 
ternal revenue  made  Nov.  3oth,  1872.  It  is  apparent,  there- 
fore, that  the  government  went  not  only  to  the  sources  of  income 
and  took  toll  there,  but  went  to  the  income  in  individual  hands 
and  took  toll  there  regardless  of  the  source.  Thus  the  man  whose 
income  was  derived  wholly  from  dividends  on  bank  stocks,  from 
stocks  in  insurance  companies  and  railroad  companies  and  from 
interest  on  railroad  bonds,  had  a  certain  percentage  thereof  with- 
held from  him  by  the  respective  corporations,  which  paid  such 
withheld  percentage  directly  to  the  government,  while  another 
chop  was  cut  out  of  the  remainder  after  it  reached  his  hands,  if 
the  income  so  received  by  him  was  above  the  amount  exempted. 
The  incomes  exempted  at  first  were  those  under  $600.00;  after- 
wards, $1,000;  still  later,  they  were  exempt  up  to  $2,000.  On  in- 
comes over  the  exemption  and  up  to  $5,000,  the  tax  was  5  per 
cent. ;  from  $5,000  to  $10,000,  the  tax  was  7^/2  per  cent.,  and  on 
incomes  of  $10,000  and  upwards,  the  tax  was  10  per  cent.  "In 
1872,"  says  AVells,  "with  an  exemption  of  $2,000,  only  72,949 
persons  in  the  United  States,  out  of  a  population  of  over  39,000,- 


HERTIG    ON    TAXATION.  377 

ooo,  admitted  under  oath  that  they  were  in  receipt  of  any  income 
liable  to  taxation  in  excess  of  the  exemption.  Those  only  who 
were  officially  and  intimately  connected  at  this  time  with  the  inter- 
nal revenue  department  of  the  United  States  treasury  can  form 
any  adequate  idea  of  the  amount  of  perjury  and  fraud  that  char- 
acterized and  pervaded  the  country,  during  the  years  1867  to 
1872,  as  the  outcome  of  the  then  existing  system  of  internal 
revenue." — Theory  and;  Practice  of  Taxation,  pp.  528-529. 

The  art  of  income-tax  collection  has  not  in  the  United  States 
gone  beyond  the  rudimentary  stage.  Collection  is  complete  in  di- 
rect proportion  to  our  reaching  the  source  of  income.  Every 
property  within  the  United  States  that  creates  shares  of  stocks  or 
issues  of  bonds,  every  state,  city,  county  or  district  that  issues 
bonds — is  a  fountain  of  personal  property  whose  streams  are  lost 
and  hidden  when  they  reach  the  individual  owner,  but  whose  vol- 
ume at  the  fountain  head  can  be  accurately  measured  and  taxed. 
Go  to  the  source  and  tax  there !  With  appropriate  amendment 
of  the  federal  constitution,  practically  all  of  the  great  volume  of 
bonds  of  every  kind,  all  the  shares  of  stocks  in  corporations  and 
all  other  corporation  securities — would  come  within  the  reach  of 
the  taxing  power.  I  say  appropriate  amendment  of  the  federal 
constitution,  because  only  in  that  way  can  full  taxation  of  such 
properties  be  reached  at  a  reasonably  uniform  rate.  If  all  of  the 
states  but  one  or  two  could  be  depended  upon  to  follow  a  uni- 
form policy  in  this  matter,  and  there  were  no  technical  obstacles 
to  fustrate  such  policy,  it  would  still  fail  to  reach  satisfactory  re- 
sults, because  the  one  or  two  states  pursuing  a  different  policy 
could  balk  in  great  measure  the  legislation  of  the  others.  With 
absolute  free  trade  between  the  states,  some  of  them,  like*  New 
Jersey,  are  sure  to  take  advantage  of  the  opportunity  thus  af- 
forded to  make  special  revenues  by  offering  special  privileges  and 
special  protection  to  corporate  and  other  wealth.  By  amendment 
of  the  federal  constitution,  the  limitation  on  taxation  fixed  by 
the  United  States  supreme  court  in  the  Foreign-held  Bond  case 
(15  Wall.),  can  be  equitably  modified,  so  that  no  American  bonds 
or  other  American  securities,  whether  held  outside  the  United 
States,  or  within  the  United  States  but  outside  the  state  where 
issued — shall  escape  their  just  share  of  taxation.  In  short,  to 
reach  the  source  we  need  the  proper  means.  It  has  been  custom- 
ary and  not  inappropriate  to  speak  of  the  federal  constitution  as 
an  instrument  that  is  practically  non-amendable,  except  under  the 
stress  of  civil  war ;  but  nobody  has  seriously  tried  to  amend  it  by 
first  taking  a  rational  census,  so  to  speak,  of  the  wants  of  the  peo- 
ple, and  then  urging  them  to  the  work  "in  their  sovereign  and 
collegiate  capacity."  Guerilla  offerings  of  amendments  there 


378  HERTIG    ON    TAXATION. 

have  been  in  abundance ;  and  such  will  never  get  inside  the  skir- 
mish lines.  The  significance  of  President  Roosevelt's  current  ad- 
vocacy of  constitutional  amendment  is  that  it  is  high  recognition 
of,  meeting  with  popular  response  to,  the  fact  that  government 
according  to  the  glittering  generality  of  the  party  platform  and 
the  gaseous  interpretations  of  the  spellbinder — is  no  longer  what' 
the  people  want,  and  that  there  must  be  a  genuine  "new  depart- 
ure." 

The  urgent  needs  of  the  people,  in  relation  to  the  revenue  side 
of  the  government  at  Washington  are 

.  I.     A  more  frugal  and  more  productive  use  of  the  national 
moneys. 

2.  To  have  the  national  government,  under  appropriate  con- 
stitutional amendment,  collect  and  equitably  distribute  certain 
revenues  among  the  several  states, — particularly  the  revenue  aris- 
ing from  the  taxation  of  what  may  be  called  inter-state  commerce 
securities. 

What  I  have  said  in  this  chapter  in  reference  to  amending  the 
federal  constitution,  is  merely  to  call  attention  to  a  particular 
phase  of  the  art  of  collecting  income  taxes  in  the  United  States. 
Prof.  Ely  has  signaled  what  he  holds  to  be  the  needs  of  the  fed- 
eral government  for  its  own  financial  ends:  i.  Flexibility  in 
its  revenue  system  ;  2.  Power  to  avail  itself  of  the  national  re- 
sources ;  3.  A  tax  system  which  shall  compel  wealth  to  bear  its 
due  share  of  burdens.  It  has,  however,  sufficient  power  of  flexi- 
bility, except  in  so  far  as  its  present  constitutional  limitation  in 
the  matter  of  income  tax  may  be  reckoned  as  too  rigid.  It  has 
power  to  use  the  inheritance  tax,  subject  only  to  the  rule  of  geo- 
graphical uniformity.  And,  as  included  in  the  right  to  regulate 
inter-state  commerce,  it  has  probably  the  right  to  tax  the  same, 
which  Prof  Ely  thinks  "would  be  a  movement  in  the  direction 
of  justice."  In  any  event,  the  financial  power  of  the  United 
States  government  is  already  enormous,  far  beyond  its  apparent 
needs.  As  already  said,  federal  frugality  and  federal  distributive 
agency  are  our  urgent  needs.  I  reserve  these  and  other  matters 
pertaining  to  the  federal  Constitution  for  my  forthcoming  work 
on  that  instrument. 

Returning  to  the  income  tax  and  again  affirming  the  justice 
of  the  income  tax  principle,  I  will  mention  "McCulloch's  adapta- 
tion of  Pope's  lines,"  which  I  doubt  not  will  be  freely  quoted  of 
the  income  tax,  when  it  comes  to  be  generally  adopted  in  the 
United  States: 

''Whoever  hopes  a  faultless  tax  to  see 

Hopes  what  ne'er  was,  is  not,  and  ne'er  shall  be." 

At  the  same  time,  the  income  tax  is  popular  with  the  masses, 


HERTIG    ON     TAXATION.  379 

and  once  discreetly  established  will  have  come  to  stay.  This  is 
shown  by  English  experience  and  the  general  adoption  of  the  in- 
come tax  by  self-governing  English  colonies.  In  1867,  the  right 
of  suffrage  was  very  much  extended  in  England ;  and  the  people, 
it  is  said,  made  use  of  their  new  power  to  continue  the  income  tax. 
The  following  brief  account  o±  the  origin  and  conditions  of  the 
modern  British  income  tax  is  very  clear  and  instructive: 

"The  income-tax  was  imposed  by  Mr.  Pitt  to  defray  some  of 
the  cost  of  the  European  and  American  wars:  it  was  abolished 
when  the  wars  ceased.  Sir  Robert  Peel  reimposed  the  tax,  as  a 
temporary  measure  to  relieve  the  country  of  the  crushing  burden 
of  protective  duties ;  Mr.  Gladstone  continued  it,  also  distinctly 
as  a  temporary  measure,  to  complete  the  work  of  free  trade ;  al- 
ways with  the  promise  of  its  abolition  when  the  fiscal  reform  was 
completed.  The  Crimean  War  and  the  Indian  Mutiny  caused  de- 
lay. The  work  was  practically  completed,  free  trade  was  estab- 
lished, and  in  1874  Mr.  Gladstone  proposed  to  redeem  his  prom- 
ises, and  abolish  the  tax.  The  reform  act  of  1867  had,  however, 
flooded  the  electorate  with  voters  who,  although  they  benefited 
more  than  any  other  classes  from  the  establishment  of  free  trade, 
declined  to  ratify  the  promises  by  which  these  benefits  had  been  se- 
cured to  them.  The  burden  of  the  income-tax  did  not  fall  on 
them,  and  they  declined  to  relieve  those  on  whom  it  did  fall.  This 
was  the  beginning  of.  the  modern  fiscal  system,  with  the  income- 
tax  as  a  permanent  factor.  Since  then  a  silent  revolution  has 
progressed,  which  has  steadily  increased  the  proportion  of  the 
burden  of  taxation  falling  upon  income-tax  payers,  and  lessened 
the  proportion  falling  on  all  other  classes." — JOSEPH  ACKLAND, 
in  Contemporary  Review,  May,  1901. 

The  same  writer  estimates  that  only  about  one-eighth  of  the 
British  people  are  directly  affected  by  the  income  tax,  and  that 
over  96  per  cent,  of  the  payers  of  income  tax  belong  to  the  mid- 
dle classes.  He  objects  to  it  as  being  inquisitorial,  and,  because 
is  takes  in  one  sum  the  payment  for  one  year,  as  violating  the 
"convenience"  rule  of  Adam  Smith,  whose  four  canons  of  taxa- 
tion are  in  substance  that  the  qualities  of  a  good  tax  are  equality, 
certainty,  convenience  and  economy.  Wells,  who  was  no  friend 
of  income  taxes,  thought  that  for  various  reasons  the  British  in- 
come tax  is  "far  more"  efficient  "than  can  be  expected  under  ex- 
isting conditions  in  the  United  States."  He  says  further :  "The 
annual  reports  of  the  British  commissioners  of  the  inland  revenue 
always  mention  extensive  evasions  of  the  income  tax.  For  the 
year  1864-65  the  amount  of  such  evasion  was  estimated  to  have 
been  equal  to  about  one-sixth  of  the  revenue  collected  under  it. 
[Eighty-three  and  one-third  percentage  of  honesty  in  returning 


380  HERTIG    ON    TAXATION. 

property  for  taxation  is  not  so  bad!]  The  demoralizing  effects 
which  are  inevitably  produced  by  the  habit  of  making  false  re- 
turns respecting  income  are  regarded  by  many  British  authorities 
as  far  more  deplorable  than  those  resulting  from  any  other  in- 
equality contingent  on  this  form  of  taxation,  as  the  transition 
from  a  fraud  upon  the  government  to  a  fraud  upon  the  public  is 
comparatively  easy." — Theory  and  Practice,  pp.  526-527. 

The  percentage  of  the  total  British  revenues  collected  by 
means  of  the  income  tax  has  been  steadily  increasing  for  some 
years.  According  to  Ackland,  above  cited,  this  percentage  was 
6.76  in  1875  16.23  in  1885,  19.84  in  1895,  and  22.80  in  1901.  Ac- 
cording to  the  Statesman's  Year  Book  for  1902,  it  yielded  13,470,- 
ooo  pounds  sterling  for  the  fiscal  year  ending  March  31,  1893,  and 
26,920,000  pounds  for  the  fiscal  year  ending  March  31,  1901. 
The  estimated  yield  for  the  year  ending  March  31,  1902,  was 
33,800,000  pounds.  But  the  tax  was  only  sixpence  in  the  pound 
(2l/2  per  cent)  in  1893,  seven  pence  in  1894,  eight  pence  in  1895. 
On  account  of  the  Boer  war  it  was  raised  to  twelve  pence  in  1901, 
and  to  fourteen  pence  in  1901.  Complaint  is  made  that  the  reve- 
nues of  English  railways  are  falling  off  because  the  people,  on 
account  of  higher  income  tax,  do  not  travel  so  much  as  they  did. 
Incomes  to  the  amount  of  160  pounds  are  exempt ;  "incomes  be- 
tween 1 60  pounds  and  400  pounds  receive  an  abatement  of  160 
pounds ;  while  incomes  between  400  and  500  pounds  are  permit- 
ted to  deduct  100  pounds." — SELIGMAN,  Essays  in  Taxation,  p. 
312.  Certain  small  allowances  are  also  made  for  life  insurance 
premiums  paid  by  the  victim.  The  gross  annual  income  assessed 
in  1900,  or  the  gross  annual  value  of  "property  and  profits  as- 
sessed to  the  income  tax  in  the  year  ended  April  5,  1900,  in  the 
United  Kingdom,"  (Statesman's  Year  Book,  1902),  was  788,023,- 
603  pounds.  But  it  must  not  be  forgotten  "that  the  English  sys- 
tem is  not  a  tax  on  general  income,  but  on  product,"  including 
income  from  commercial  pursuits,  the  annual  value  of  lands  and 
houses,  of  railways,  mines  and  quarries,  gas  works,  water  works, 
canals,  inland  navigation,  iron  works,  etc.  This  caution  illustrates 
the  difficulties  in  comparing  the  tax  systems  of  different  coun- 
tries. Compare  p.  14,  above,  and  the  citation  from  Adolph  Wag- 
ner in  note  thereto.  The  general  fact  relating  to  income  taxes 
should  also  be  mentioned,  that  the  (formal)  income  tax  in  coun- 
tries where  the  general  condition  of  the  people  is  extreme  pov- 
erty, is  a  failure.  The  British  found  that  it  would  not  work  in 
India. 

The  so-called  "unit  rule"  for  taxing  the  franchises  of  cor- 
porations is  in  violation  of  the  income-tax  principle,  and  hence 
will  need  to  be  much  modified  in  practice.  In  one  group  of  cor- 


HERTIG    ON    TAXATION.  381 

porations  all  operating  in  Chicago,  and  all  before  the  federal  cir- 
cuit court  as  complainants  in  a  recent  case, — a  reductio  ad  absurd- 
urn  of  the  letter  of  the  rule  was  clearly  worked  out.  The 
literal  application  of  the  rule  made  a  difference  from  one  year  to 
another  of  more  than  $15,000,000  in  the  aggregate  valuations  of 
said  group  of  corporations,  and  that  without  any  material  change 
having  occurred  in  their  physical  condition  and  earnings.  See  pp. 
229,302,  above,  where  this  rule  is  quoted  and  mentioned.  The 
full  report  of  the  case  to  which  the  Minneapolis  Tribune  referred 
in  the  passage  quoted  from  that  journal  is  now  before  me.  The 
re-assessment  for  1900  which  was  before  the  court  had  been  made 
as  a  result  of  mandamus  proceedings,  in  which  the  supreme  court 
of  Illinois  had,  on  appeal,  sustained  the  letter  of  the  unit  rule. 
It  must  be  noted,  however,  that  the  "literal  application"  of  the  rule 
in  these  cases  had  not  been  made  by  the  state  board  of  equaliza- 
tion for  both  years  (1900-1901),  but  only  for  the  year  1900,  under 
the  compulsion  of  the  peremptory  writ  of  mandamus.  The  board 
had  seemingly  used  its  discretion  for  1901,  or  at  least  had  not  fol- 
lowed the  stock  quotations  in  assessing  for  the  latter  year.  And 
the  court  remarked :  "If,  between  these  two  assessments,  a  consid- 
erable disparity  should  exist,  the  increase  ought  to  be  found  in  the 
assessment  for  1901,  and  not  in  that  for  1900.'"  But  in  whatever 
way  the  unit  rule  works,  or  is  worked,  so  long  as  it  is  apparent 
that  the  assessments  by  it  artificially  "jacked  up,"  cannot  stand 
with  reasonable  uniformity  for  two  successive  years, — so  long-  is 
it  equally  apparent  that  it  does  not  embody  rational  taxation.  The 
1901  assessment  of  these  corporations,  it  must  be  remembered,  had 
not  been  impeached.  The  following  is  an  abstract  of  the  figures 
before,  and  the  result  reached  by,  the  court : 
Chicago  Union  Traction  'Company- 
Reassessment  of  for  1900,  a  little  over $14,000,000 

Assessment  of  for  1901,  about 8,000,000 

"A  loss  of  about  40  per  cent." 
Chicago  Consolidated  Traction  Company — 

Reassessment  for  1900,  a  little  over 3,750,000 

Assessment  for  1901,  about 2,000,000 

Drop  "about  47  per  cent." 
People's  Gas  Company — 

Reassessment  for  1900,  over 12,500,000 

Assessment  for  1901,  about 8,500,000 

Drop  "about  32  per  cent." 
Chicago  City  Railway — 

Reassessment  for  1900,  a  little  over 6,000,000 

Assessment  for  1901,  a  little  over 4,250,000 

Drop  "about  30  per  cent." 


382  HERTIG    ON    TAXATION. 

Chicago  Telephone  Company- 
Reassessment  for  1900,  a  little  less  than 2,600,000 

Assessment  for  1901,  a  little  over 1,700,000 

Drop  of  about  34^2  per  cent. 
Chicago  Edison  'Company- 
Reassessment  for  1900,  a  little  over 2,400,000 

Assessment   for   1901,   a  little  over 1,300,000 

Drop  about  46  per  cent. 
South  Chicago  City  Railway- 
Reassessment,  1900,  nearly ' 570,000 

Assessment  for  1900,  a  little  less  than 300,000 

Drop  about  47  per  cent. 

"These  assessments,  so  widely  divergent,  were  upon  the  same 
properties,  by  the  same  board,  entered  almost  on  the  same  day. 
The  dates  as  of  which  they  spoke  were,  it  is  true,  a  year  apart, — 
the  one  being  of  the  first  of  April,  1900,  the  other  of  the  first  of 
April,  1901.  But  the  tide  of  stock  quotations,  and  the  tide  of  cur- 
rent values,  were  higher  on  the  latter  day  than  [on]  the  former. 
But  both  [of  these  assessments]  cannot  be  vindicated. 
In  the  very  nature  of  things,  One  or  the  other  has  been  made  up 
under  some  species  of  fraud,  mistake  or  coercion.  *  * 
The  record  convinces  us  that  the  assessment  of  other  property 
throughout  the  state,  including  railroad  for  the  year  1900,  as 
finally  equalized  by  the  state  board  of  equalization,  did  not  exceed 
seventy  per  cent  of  the  cash  value  [of  which  only  20  per  cent  was 
taken  and  extended  as  the  taxable  value  according  to  the  Illinois 
statute.]" 

The  court,  however,  would  not  grant  an  injunction  except  "on 
terms,"  and  these  were  that  the  companies  plaintiff  should  first 
pay  to  the  proper  officers,  in  addition  to  the  tax  which  they  had 
already  paid  upon  their  first  assessment  for  1900,  additional  taxes 
for  that  year,  according  to  the  following  rule : 

"The  basis  shall  be  the  true  net  earnings  of  the  several  com- 
plainants for  the  year  covering  Aoril  i,  1900,  proper  allowance 
being  made  for  depreciation  and  replacement,  but  not  for  exten- 
sions ;  and  reduced  further  by  the  amount  of  additional  taxes  that 
the  enforcement  of  this  rule  produces.  Upon  this  basis  the  value 
of  complainants'  capital  stock,  including  franchises  and  tangible 
property,  shall  be  capitalized  on  a  ratio  of  six  per  cent,  [capital 
value  enough  to  produce  at  six  per  cent  the  net  earnings  so 
found]  ;  this  eaualized  by  reduction  of  thirty  per  cent,  [because 
other  propertv  in  Illinois  had  been  valued  at  only  70  per  cent,  of 
its  cash  value]  ;  and  then  divided  by  five  [to  comply  with  the  Illi- 
nois statute  prescribing  20  per  cent,  of  the  value  as  the  taxable 
value.]  The  sums  thus  produced  will  be  regarded  as  the  true  re- 


HERTIG    ON    TAXATION.  383 

assessments  for  the  year  1900.  Upon  this  the  tax  will  be  ex- 
tended at  the  true  rate  for  1900,  *  *  *  not  to  exceed  eight 
and  thirty-seven-hundredths  per  cent,  [from  which  will  be  sub- 
tracted the  taxes  already  paid  for  the  year  1900],  and  the  balance 
will  be  the  sum  required." — Chicago  Union  Traction  Co.  v.  State 
Board  of  Equalization,  114  Federal  Reporter,  557.  Modified  as 
the  re-assessment  for  1900  was  by  this  order,  its  effect  was  to  give 
to  Chicago  a  handsome  increase  over  the  taxes  paid  by  the  cor- 
porations under  the  routine  and  ridiculously  low  first  assessment 
for  1900.  The  net  earnings  basis  adopted  by  the  court  would 
make  the  assessments  for  1900  approximate  those  for  1901,  that 
is,  lower  them  from  30  to  47  per  cent,  from  the  re-assessment 
made  by  the  board  as  a  result  of  the  mandamus  proceedings.  The 
ground  of  the  federal  court's  decision  was  that  the  re-assessments, 
under  compulsion  of  mandamus,  "did  not  *  *  *  express  the 
real  judgment  of  the  state  board  as  an  independent  tribunal,  and 
were  therefore,  in  effect,  fictitious  judgments,"  and  hence  were  in 
violation  of  the  federal  constitution  as  taking  or  about  to  take 
property  "without  due  process  of  law." 


CHAPTER  XX. 


That  taxes  which  do  not  confiscate  are  in  effect  income  taxes,  is  no  nov- 
elty— Taxes  in  general  should  fall  on  income,  but  the  state  has  full 
right,  and  sometimes  ought,  to  impose  them  on  capital — Excise  taxes 
are  in  form  taxes  on  neither  income  nor  capital — Weakness  of  the  unit 
rule — The  incidence  of  taxation — Wells  disgusted  with  Seligman — 
Salient  points  in  the  latter's  book  on  "Shifting  and  Incidence" — An 
Italian  striving  to  outdo  Germany — Negative  and  skeptical  views  of 
incidence — Pioneers  of  equal  diffusion— Canard  and  his  followers — 
Thiers  and  Wells — American  Bible  Society  helps  to  pay  whisky  and 
tobacco  taxes ! — Ricardo  once  more,  his  followers  and  critics — Essen- 
tials of  incidence  for  Americans. 


Insisting  in  these  pages,  as  I  have  done  more  than  once,  that 
all  taxes,  except  in  so  far  as  they  confiscate,  are  income  taxes  in 
fact,  whatever  their  form,  I  do  not  mean  to  imply  that  such  pro- 
position is  a  novelty  or  a  personal  discovery.  "Income  is  now  so 
generally  recognized  as  the  normal  source  of  taxation  that  it  is 
somewhat  surprising  to  find  that  it  has  been  only  after  property 
and  other  taxes  have  failed  to  produce  the  revenue  required  that 
the  plan  of  a  direct  taxjon  income  has  been  adopted." — P. \LCXAYK, 
Die.  of  Polit.  Econ.  III.,  p.  521.  On  the  proposition  that  income 
is  the  normal  source  of  taxation,  rests  the  "general  rule  of  tax- 
ation sometimes  laid  down  that  it  should  fall  on  income,  and  not 
on  capital."  Though  one  believe  in  the  truth  of  the  proposition 
and  in  the  soundness  of  the  "general  rule"  which  I  have  just  quot- 
ed in  J.  S.  Mill's  words,  it  by  no  means  follows  that  there  should 
be  no  exceptions  to  the  rule.  The  state  has  a  lecral  right  to  tike 
capital  by  taxation;  and  such  right  is  just  as  valid,  just  as  well 
grounded,  as  the  right  to  take  by  taxation  a  portion  of  the  citi- 
zen's income.  Thus  Mill  himself  does  not  "attach  any  import- 
ance, in  a  wealthy  country,  to  the  objection  made  against  taxes 
on  legacies  and  inheritances,  that  they  are  taxes  on  capital," 
though,  "it  is  perfectly  true  that  they  are  so." — Polit.  Econ.  Book 
V.,  ch.  ii.,  sec.  7.  Even  where  the  state  by  her  taxes  does  not 
intend  to  confiscate,  the  effect  of  all  systems  of  fixation,  as  we 
find  them,  results  in  partial  confiscation.  Whenever  the  state 


HERTIG    ON    TAXATION.  385 

levies  a  tax  upon  wholly  unproductive  property,  or  upon  produc- 
tive property  an  annual  tax  greater  than  its  annual  income,  or 
upon  certain  kinds  of  property  a  tax  which  materially  reduces  the 
net  income  from  such  property  below  the  percentage  of  net  in- 
come yielded  by  most  other  kinds  of  property, — in  each  of  these 
cases  there  is  partial  confiscation  in  the  sense  which  I  attacn  to  the 
word.  Taxation,  then,  is  confiscation  to  the  extent  that  it  takes 
from  individual  or  corporation  the  individual  or  corporation  cap- 
ital, using  "capital"  in  the  sense  thereto  attached  by  expert  ac- 
countants. "To  provide  that  taxation  shall  fall  entirely  on  in- 
come, and  not  at  all  on  capital,  is  beyond  the  power  of  any  system 
of  fiscal  arrangements." — MILL,  ibid.  Ordinarily  and  normally, 
therefore,  both  direct  and  indirect  taxes  are,  "and  of  right  ought 
to  be,"  paid  out  of  income ;  but  partially  and  exceptionally  some 
part  of  them  is  always  paid  out  of  capital.  What  taxes  shall  be 
purposely  levied  for  payment  out  of  capital  is  a  question  of  dis- 
creet statesmanship.  Strictly  speaking,  an  indirect  tax,  such  as 
the  excise  or  any  tax  on  commodities,  is  in  form  neither  a  tax  on 
income  nor  a  tax  on  capital ; — what  it  is  in  fact  depends  on  the 
circumstances  of  >those  who  consume  the  commodities  so  taxed. 

No  legislative  act  is  more  unwise  than  providing  for  a  tax 
which  shall  manifestly  confiscate  in  whole  or  in  part,  if  the  sole 
purpose  of  such  act  or  the  sole  effect  thereof  lies  in  an  immediate 
increase  of  public  revenue.  I  speak,  of  course,  from  the  present 
standpoint  of  the  American  states,  neglecting  the  extraordinary 
emergencies  which  might  be  invoked  to  justify  such  confiscation 
solely  for  revenue.  Suppose  an  immensely  valuable  property  to 
be  seriously  crippled  or  impaired  in  market  value  by  such  partially 
confiscatory  tax ; — if  it  is  corporate  property,  the  "lamb"  share- 
holders will  be  the  first  to  sell  their  holdings,  while  the  more 
reckless  and  daring  speculators  will  be  left  in  full  control  and 
will  use  their  power  to  wrest  from  succeeding  legislatures  a  repeal 
or  substantial  modification  of  the  law  that  shook  out  the  "lambs." 
They  will  be  aided  in  this  by  the  natural  apathy  which  succeeds 
a  raid  and  by  the  evidence  of  disaster  to  unintended  victims  of  the 
same.  Expropriation  is  the  proper  sequel  of  stealthy  appropria- 
tion ;  but  the  "tail-twisting"  which  flows  from  moral  indignation 
and  that  which  flows  from  corrupt  aim — are  alike  objectio-^Me 
in  result,  and  from  the  standpoint  of  result  are  on  much  the  same 
plane  of  statesmanship.  The  see-saw  in  assessed  valuations  that 
would  result  in  attempting  to  apply  literally  the  so-called  "unit 
rule" — a  see-saw  to  which  would  contribute  not  only  the  normal 
fluctuations  of  the  stock  exchange  but  the  more  violent  ones 
caused  by  the  occasional  application  of  the  rule  itself— n.  see-saw 
to  which  would  additionally  contribute  not  only  th :  ^ner^e^i? 


386  HERTIG    ON    TAXATION. 

action  of  those  directly  interested  and  spurred  by  the  most  power- 
ful motives  that  greed  can  furnish,  but  also  the  inevitable  relapse 
of  the  taxing  authorities  from  spasmodic  and  ill-judged  "reform," 
— who  is  there  in  the  thinking  class  that  need  be  told  twice,  that 
in  the  troubled  financial  pool  by  such  see-saw  created,  your  shark 
alone  would  prove  to  be  the  superior  swimmer?  The  variation 
of  $15,000,000  in  assessed  valuations  from  one  year  to  another, 
whatever  the  cause,  as  shown  in  the  Chicago  case  reviewed  at 
the  close  of  the  last  preceding  chapter, — is  a  strong  enough  sup- 
porting fact.  But  I  again  touch  on  problems  which  must  be  left 
to  the  New  Jurisprudence  and  the  Civil  Nation ! 

Readers  of  these  pages  can  attest  to  having  found  them  rea- 
sonably free  from  the  metaphysics  of  taxation.  I  have,  in  that 
connection,  successfully  resisted  the  temptation  to  cite  and  scalp 
certain  German  authors.  If  the  subject  were  sufficiently  poeti- 
cal, or  even  if  I  were,  like  Mr.  Richard  Watson  Gilder  of  the 
Century  Magazine  and  of  the  Century  Dictionary,  sure,  in  any 
event,  to  be  heard  by  the  muses, — I  should  certainly  invoke  their 
aid  to  carry  me  over  "The  Shifting  and  Incidence  of  Taxation," 
without  letting  me  lapse  into  metaphysics.  That  quoted  phrase, 
by  the  way,  is  the  title  of  one  of  Seligman's  books,  in  314  pages 
of  long  primer  text — lines  four  inches  long  and  37  of  them  to  the 
page.  The  question,  then,  as  to  who  evades  and  who  finally  pays 
taxes,  is  not,  as  Prof.  Adams  holds  services  for  which  one  pays 
fees  are,  outside  of  "quantitative"  estimation  (p.  91,  supra),  but, 
in  a  sense,  may  be  measured  by  the  size  of  the  book  which  Prof. 
Seligman  has  devoted  to  it  (New  York,  1899).  I  have  not- be- 
fore me  the  earlier  edition,  published,  I  believe  in  1892,  and  which 
David  A.  Wells  called  "a  somewhat  complete  review  of  the  con- 
flicting theories  advanced  by  participants"  "in  the  great  difference 
of  opinion"  as  "to  the  method  or  extent  to  which  taxes  diffuse 
themselves  after  their  first  incidence."  Wells  is,  however,  un- 
gracious enough  to  say  that  from  this  "somewhat  complete  re- 
view" of  such  "conflicting  theories  *  *  *  one  rises  with  a 
feeling  of  weariness  and  disgust." — Theory  and  Practice,  p.  569. 
Such,  however,  is  not  my  feeling  as  regards  Seligman's  book. 
That  "the  body  of  a  dead  enemy  smells  always  good,"  is  a  most 
shocking  sentiment, — in  the  crude  and  literal  sense,  in  the  bar- 
barous sequence,  of  its  historical  setting ;  but  in  a  figurative  sense, 
and  as  applying  to  the  common  enemy  (figures  in  the  politico- 
economic  Dunciad)  whose  bodies  Seligman  has  embalmed  with 
professorial  spices  in  his  Shifting  and  Incidence,  I  find  myself 
sufficiently  responsive  to  the  sentiment  to  say,  at  least,  that  these 
embalmed  bodies  are  rather  pleasing  than  otherwise.  I  fancy 


HERTIG    ON    TAXATION.  387 

that  one  reason  for  the  "weariness  and  disgust"  of  Wells  is  the 
fact  that  Seligman  "stigmatizes"  the  Wells  theory  "of  the  non- 
diffusion  of  taxes  on  land"  "as  so  very  superficial  as  scarcely  to 
deserve  a  refutation." — Theory  and  Practice,  p.  590. 

"Who  pays  your  tax?"  asks  the  rugged-minded  Anglo-Sax- 
on; and  is  likely  to  be  greeted  with  the  kindred  and  emphatic 
answer,  "I  pay  it  myself."  But  this,  like  "the  sun  do  move"  of 
the  colored  preacher,  is  too,  too  plain,  and  lacks  the  haziness  of 
atmosphere  as  well  as  of  some  other  things.  The  average  book- 
keeper pays  the  tax,  and  charges  it  to  "expense,"  which  consti- 
tutes its  final  incidence  or  lighting  place  so  far  as  he  and  his  em- 
ployer are  concerned.  They  would  know  better  and  different, 
perhaps,  if  they  should  consult  that  modern  Italian,  Prof.  'Conig- 
liani.  The  old  Italians,  in  Latin  Rome,  had  the  rare  good  fortune 
to  have  only  the  Greeks  to  imitate  in  art,  poetry  and  philosophy, 
and  imitated  as  best  they  could ;  the  modern  Italians,  in  their  debt 
and  anarchist-ridden  Italy,  are  additionally  cursed  with  German 
pedantry,  and  now  strive  as  zealously  to  imitate  that  as  their  fore- 
bears did  to  pattern  after  the  Greeks.  Conigliani  wrote  a  book 
whose  title,  translated,  runs,  "General  Theory  of  the  Economic 
Effects  of  Taxes:  a  Sample  of  Pure  Economics"  (Milan,  1890). 
This  seems  to  have  paralyzed  the  book  trade  in  Milan,  for  eight 
years  afterwards  he  brought  out  a  second  book  in  Modena,  en- 
titled "The  Reform  of  the  Laws  on  Local  Taxes,"  and  of  the 
moderate  compass  of  751  pages — all,  like  the  players'  play  in 
Hamlet,  "writ  in  choice  Italian."  Seligman  lets  the  first  book 
speak  for  itself  by  giving  and  translating  a  characteristic  passage ; 
he  speaks  for  the  second,  by  calling  it  an  "admirable  book — which, 
like  so  many  recent  works  by  Italian  writers,  fairly  staggers  the 
reader  with  its  wealth  of  material  and  evidences  of  wide  read- 
ing." I  mention  both  books  and  quote  Seligman's  paragraph 
from  the  first,  to  show  the  American  tax-levier  and  tax-payer  that 
they  may  well  claim  forgiveness  as  not  knowing  what  they  do: 
"A  tax  of  given  intensity  and  extension  falls  with  the  less  in- 
tensity and  extension  on  individual  economies,  and  produces  a 
less  unequal  effect  on  economic  society,  in  proportion  as  society 
is  more  developed.  The  incidence,  when  it  does  not  have  a  con- 
siderable extension  or  intensity,  assumes  the  less  easily  the  char- 
acter of  a  change  in  activity,  in  proportion  as  society  is  more  ad- 
vanced. Finally  the  change  in  consumption  will  take  place  with 
greater  disturbance  of  the  equilibrium  in  the  degree  of  the  satis- 
faction of  wants,  and  therefore  with  less  change  in  the  internal 
arrangement  of  individual  economy,  in  proportion  as  the  social 
environment  in  which  these  chanees  of  taxation  take  place  is 
more  advanced."  'And  this,  Conigliani  tells  us,'  "completely  ex- 


388  HERTIG    ON    TAXATION. 

hausts  the  general  theoretic  problem  of  the  effects  of  taxation."— 
Shifting  and  Incidence,  p.  171.  "After  that,"  as  the  French  say, 
"-one  must  draw  up  the  ladder" :  there  is  need  of  a  break  in  con- 
tinuity in  that  direction. 

"In  the  process  of  taxing,"  says  Seligman  in  his  introduction, 
"we  must  distinguish  three  conceptions.  First,  a  tax  may  be 
imposed  on  some  person ;  secondly,  it  may  be  transferred  by  him 
to  a  second  person ;  thirdly,  it  may  be  ultimately  borne  by  this 
second  person  or  transferred  to  others  by  whom  it  is  finally  as- 
sumed. The  process  of  the  transfer  of  a  tax  is  known  as  the 
shifting  of  the  tax,  while  the  settlement  of  the  burden  on  the 
ultimate  taxpayer  is  called  the  incidence  of  the  tax.  The  inci- 
dence of  the  tax  is  therefore  the  result  of  the  shifting  [when  in- 
deed the  tax  is  shifted],  and  the  real  economic  problem  lies  in  the 
nature  of  the  shifting,"  [after  in  any  given  case  it  has  first  been 
determined  that  there  are  shif tings.] 

As  I  mean  to  be  very  simple  and  must'  needs  be  brief  in  my 
own  treatment  of  this  subject,  I  will  let  the  negative  and  skepti- 
cal voices  be  heard  first  as  preparatory  to  what  I  believe  may  be 
said  of  positive  and  practical  value.  "An  English  parliamentary 
committee  on  local  taxation,  presided  over  by  one  o>f  the  foremost 
of  England's  practical  and  theoretical  economists,  George  J.  Gos- 
chen,  reported  in  1872  that  they  could  not  tell,  and  no  man  could 
possibly  find  out,  whether  the  tax  on  the  occupier  of  houses  was 
paid  by  the  tenant  or  the  owner  of  the  land." — DENSLOW,  Eco- 
nomic Philosophy,  p.  459. 

*  *  *  "Where  m  relation  to  so  many  taxes  it  is  impossible 
for  statesmen  to  agree  as  to  where  the  incidence  of  the  tax  actual- 
ly rests,  yet  the  tax  produces  the  revenue  and  the  citizen  prospers 
the  question  where  it  rests  becomes  a  mere  philosophical  and 
metaphysical  subtlety,  of  no  more  practical  importance  than  the 
question  where  the  ultimate  responsibility  for  human  conduct 
rests,  or  where  the  human  will  begins,  or  where  in  economics  the 
cost  of  production  begins — whether  with  the  final  process,  or 
with  the  production  of  the  implements,  and  if  so  whether  pro- 
duction shall  be  deemed  to  include  invention  of  the  implements, 
in  which  case  the  effort  to  compute  the  cost  of  producing  a  bushel 
of  corn  would  carry  us  back  to  the  beginning  of  the  world.  Such 
subtleties  may  be,  and  largely  through  Mill's  influence  are,  mis- 
taken" for  economic  science,  but  they  have  nothing  to  do  with  it, 
but  belong  to  the  widely  different  domain  of  metaphysical  gym- 
nastics."— Id.  460. 

Denslow's  book,  by  the  way,  is  another  of  those  books  which 
the  professors  pass  over  in  silence, — largely,  perhaps,  because  he 
"skinned  to  a  finish"  the  free-trade  wing  of  them,  an  achievement, 


HERTIG    ON    TAXATION.  389 

for  the  rest,  that  does  not  quite  vouch  for  Denslow's  inerrancy. 
He  by  no  means  confesses  impotence  on  the  question  of  incidence, 
but  cuts  it  short  with  a  "not  worth  while."  Adolph  Held,  on  the 
,  contrary,  takes  the  purely  skeptical  position,  that,  whether  worth 
our  while  or  not  to  know  where  a  tax  finally  alights,  it  is  past 
our  finding  out.  "He  was  an  acute  thinker,"  says  Seligman,  "and 
a  man  of  the  noblest  ideals ;  but  he  became  so  imbued  with  the 
idea  that  all  of  the  old  political  economy  was  worthless  that  his 
strictures  are  as  often  false  as  true."  The  pity  of  it  that  he  could 
not  have  sat  awhile  at  the  feet  of  Prof.  Summer  of  Yale,  or 
basked  in  the  pervading  cheerfulness  of  Prof.  Hadley  of  the 
same!  ''From  Held,  therefore,"  concludes  Seligman,. though  not 
precisely  in  this  connection,  "we  learn  nothing  positive."  It  is, 
however,  always  a  cheerful  and  a  noteworthy,  because  rare,  fact, 
when  a  schooled  German  is  willing  to  admit  that  a  given  subject 
is  beyond  the  reach  of  his  knowledge,  though  for  him  to  say  so 
it  takes  73  pages  of  the  Turbijiger1  Tim-cscript  for  the  Entire 
Range  of  Stale-knouiedgeship. 

From  negative  theories  of  incidence,  the  transition  is  easy 
and  natural  to  theories  which  affirm  positively  but  on  such  terms 
as  largely  negative  the  importance  of  what  they  do  affirm.  Such 
a  theory  Seligman  calls  "the  equal-diffusion  theory."  Lord 
Mansfield,  in  a  speech  in  the  House  of  Lords,  put  forth  at  least 
the  germ  of  an  equal-diffusion  theory.  This  speech,  delivered  in 
1766,  is  a  clear  and  cogent  argument  in  favor  of  the  right  of  Eng- 
land to  tax  her  colonies,  and  expressly  waiving  discussion  of 
"the  expediency  of  the  tax,"  which  he  correctly  declared  "must 
necessarily  be  taken  separate,  if  there  is  any  true  logic  in  the 
world."  In  arguing  that  a  prior  speaker  had  made  a  false  dis- 
tinction between  "internal  and  external  taxes"  Mansfield  said : 
"The  noble  lord  who  *  *  *  denied  *  *  *  the  right  of 
*  *  *  Parliament  *  *  *  to  lay  internal  taxes  upon  the 
colonies,  allowed  at  the  same  time  that  restrictions  upon  trade, 
and  duties  upon  the  ports,  were  legal.  But  I  cannot  see  a  real 
difference  in  this  distinction  ;  for  I  hold  it  to  be  true,  that  a  tax 
laid  in  any  place  is  like  a  pebble  falling  into  and  making  a  circle 
in  a  lake,  till  one  circle  produces  and  gives  motion  to  another, 
and  the  who-le  circumference  is  agitated  from  the  centre.  For 
nothing  can  be  more  clear  than  that  a  tax  of  ten  or  twenty  per 
cent,  laid  upon  tobacco,  is  a  duty  laid  upon  the  inland  plantations 
of  Virginia,  a  hundred  miles  from  the  sea,  wheresoeve^  the  to- 
bacco grows."  Mansfield,  however,  says  Seligman,  "made  no 
further  application  of  the  doctrine." 

A  contemporary  of  Mansfield  in  an  anonymous  essay  (Lon- 
don, 1767),  cited  by  Seligman,  reasoned  acutely  enough  that 


390  HERTIG    ON    TAXATION. 

"every  new  tax  does  not  only  affect  the  price  of  the  commodity 
on  which  it  is  laid  but  that  of  all  others,  whether  taxed  or  not, 
and  with  which,  at  first  sight  it  seems  to  have  no  manner  of  con- 
nection. Thus,  for  instance,  a  tax  on  candles  must  raise  the 
price  of  a  coat,  or  a  pair  of  breeches ;  because  out  of  these,  all  the 
taxes  on  the  candles  of  the  wool-comber,  weaver,  and  the  tailor, 
must  be  paid."  Entirely  in  this  line  is  the  very  modern  instance 
so  pleasantly  put  forth  by  Wells :  'The  American  Bible  Society 
is  always  in  part  loaded  with  whisky  and  tobacco  taxes  paid  by 
the  printers,  papermakers  and  bookbinders,  or  by  the  producers 
of  articles  consumed  by  these  mechanics,  and  reflected  and  em- 
bodied in  their  wages  and  the  products  of  their  labor  according 
to  the  degree  of  absence  of  competition  from  fellow-mechanics 
who  abstain  from  the  use  of  these  and  other  taxed  articles. "- 
Theory  and  Practice,  585. 

The  equal  diffusion  theory,  as  germinal  with  Mansfield  and 
other  English  writers  and  with  the  Italian  Verri,  whose  Medita- 
tions on  Political  Economy  came  out  in  1771,  seems  "to  have 
passed  unnoticed"  (Seligman,  p.  125),  until  in  1801,  the  French- 
man Canard  made  it  his  own  and  winged  it  for  self-sustaining 
flight  in  his  Principles  of  Political  Economy.  He  concludes  that 
"the  tax  you  lay  on  one  branch  of  industry  is  like  the  blood-let- 
ting which  the  surgeon  does  on  your  arm :  the  vein  he  pricks  is  no 
poorer  in  blood  after  the  operation  than  all  the  other  parts  of  the 
body."  In  taxation,  then,  it  is  the  first  pain  of  the  new  tax  that 
counts,  the  friction  it  produces  before  equilibrium  returns,  which 
friction  throws  business  out  of  gear  for  the  time  being.  Hence 
one  can  boldly  put  forth  "this  great  truth,  that  every  old  tax  is 
good,  and  every  new  tax  is  bad."  Disciples,  therefore,  of  Canard 
have  improved  on  the  master, — the  Frenchman,  Cherbuliez,  by 
declaring  stability  to  be  "the  most  essential  merit,  mobility  the 
gravest  defect  that  a  practical  system  can  have"  ;  the  German, 
Prittwitz,  by  declaring,  with  relentless  logic  that  the  only  right 
way  to  tax  is  to  make  the  tax  laws  fixed  and  unchangeable,  and 
that  thus  the  worst  thinkable  system — the  worst,  that  is,  in  its 
first  ooeration — becomes  in  time  as  good  as  the  best !  Thiers  is 
looked  upon  by  Selieman  as  sharine  with  Canard  "the  doubt- 
ful honor"  of  founding-  this  "optimistic  theory."  Thiers  thought 
that  a  tax  "is  indefinitely  passed  on,  and  tends  to  meree  into  the 
price  of  things,  to  such  extent  that  each  bears  his  part  of  it,  not 
in  proportion  to  what  he  pays  the  state,  but  in  proportion  to  what 
he  consumes.  *  *  *  The  tax  bounds  back  and  glances  on 
indefinitely,  and  between  bounding^  back  and  glancines  on  be- 
comes finally  an  integral  part  of  the  price  of  things.  I  call  this 
the  diffusion  of  the  tax."  Hence  follows  that  "the  greatest  pur- 


HERTIG     ON     TAXATION.  391 

chasers  and  consumers  are  everywhere  the  greatest  taxpayers." 
The  phrase  "diffusion  of  taxes,"  invented  by  Thiers,  has  become 
of  current  use  by  subsequent  writers  on  taxation.  Thiers,  how- 
ever, could  not  go  to  the  full  logical  length  of  his  theory,  and  be 
indifferent -as  to  the  system  of  taxation  to  be  adopted.  "God 
preserve  me  from  such  a  heresy !"  he  exclaims. 

"The  most  noteworthy  modern  follower  of  Thiers  is  the  Aus- 
trian professor,  [Lorenz  von]  Stein." — SELIGMAN,  p.  131.  This 
is  an  unkind  cut  at  our  American,  Wells,  whom  Seligman  ac- 
knowledges to  be  "the  chief  representative  [in  America]  of  this 
easy-going,  complacent  doctrine." — P.  133.  Not  that  Stein  es- 
capes criticism  at  Seligman's  hands ;  far  from  it :  he  scores  on 
the  Austrian  professor  with  the  charge  that  the  latter  has  put 
forth  a  conception  such  "that  even  all  subsequent  German  writers 
have  declared  themselves  unable  to  understand  what  it  means," 
and  whose  mystery  Seligman  therefore  excuses  himself  "from  at- 
tempting to  unravel."  I  fear  me  that  Seligman  is  a  trifle  pre- 
judiced against  Stein,  for  that  the  latter  makes  light  of  the 
"shifting  of  taxes."  And  then,  too,  Seligman  seems  timid  about 
using  the  resources  of  the  American  language  in  translating 
Stein.  1  have  no  such  timidity.  So  translated  Stein  says :  "The 
doctrine  of  the  shifting  of  the  taxes,  is  one  of  the  most  wonderful 
'ballings-up'  of  a  notion  (eine  der  wunder-lichsten  Be.^riffsver- 
wirrungenj  that  there  has  ever  been  in  science.  *  *  *  In 
place  of  the  unclear  notion  of  the  shifting  of  taxes,  I  launch  the 
clear  notion  of  the  'coughing-up'  of  the  same.  The  aggregate 
sum  of  all  taxes  must  annually,  as  surplus  of  production,  be  real- 
ly and  truly  'coughed  up'  by  the  people !" 

Enough  of  the  equal-diffusion  theory ; — like  all  of  the  general 
tax  theories  its  chief  sin  is  in  disloyalty  or  indifference  to  facts. 
We  have  seen  in  the  sinele-tax  chapter,  above,  one  phase  of  ab- 
solutism in  theories  of  incidence,  the  doctrine  that  a  tax  on  eco- 
nomic rent  falls  upon  the  landlord.  It  was  further  absolute  and 
fundamental  with  Ricardo  that  laborers  are  practically  exempt 
from  taxation,  because  they  have  nothing  to  pay  taxes  with ;  for 
"wages  never  continue  much  above  that  rate  which  nature  and 
habit  demand  for  the  support  of  the  laborer"  ;  hence  taxes  on 
wages  will  raise  wages.  A  tax  on  necessaries  will  do  the  same, 
because  they  must  be  bought  with  wages  ;  and,  the  theory  as- 
suming that  wages  before  the  tax  was  imposed  were  just  suffi- 
cient to  buy  necessaries,  the  laborer  must  now  get  higher  wages 
to  pay  for  the  higher  necessaries,  which  the  theory  also  assumes. 
"The  only  difference  between  a  tax  on  necessaries,"  said  Ricardo, 
"and  a  tax  on  wages  is,  that  the  former  will  necessarily  be  ac- 
companied by  a  rise  in  the  price  of  necessaries,  but  the  latter  will 


392  HERTIG    ON     TAXATION. 

not."  But  taxes  on  wages,  by  thus  raising  them,  "diminish  the 
rate"  of  the  employer's  profit ;  "consequently  neither  the  stock- 
holder, the  landlord,  nor  any  other  class  but  the  employers  of 
labor  will  contribute"  toward,  or  receive  the  incidence  of,  such 
taxes. — RICARDO,  Principles  of  Political  Econ.,  ch.  XVI.  But 
Ricardo  made  his  facts  as  inflexible  as  his  logic,  and  practically 
disregarded  the  cruel  lowering  to  which  even  a  wretched  standard 
of  comfort  may  yield.  J.  S.  Mill  points  out  that  the  incidence 
of  a  tax  on  wages  "is  very  different,  according  as  the  wages  taxed 
are  those  of  ordinary  unskilled  labor,  or  are  the  remuneration  of 
such  skilled  or  privileged  employments,  whether  manual  or  intel- 
lectual, as  are  taken  out  of  the  sphere  of  competition  by  a  natural 
or  conferred  monopoly."  In  other  words,  he  who  works  for 
wages  or  a  salary,  and  gets  good  wages, — something  more  than 
enough  to  live  on  according  to  the  average  standard  of  comfort 
in  his  class,  or  enough  to  live  on  according  to  an  elastic  standard, 
cannot  shift  a  tax  on  his  wages ;  but  such  tax  may  reduce  him 
"prematurely  to  that  lower  state,"  which,  according  to  the  Ricar- 
do-Mill  theory  is  his  ultimate  doom,  in  which  he  shall  barely  sub- 
sist, and  against  which  the  socialists  and  Henry  George  react  so 
energetically.  Perhaps  it  was  merely  some  shred  of  latent  optim- 
ism in  Ricardo  and  his  followers  that  drew  the  conclusion,  that 
because  the  laborer  had  just  enough  before,  to  live  somehow,  he 
must  necessarily  to  still  live 'somehow  get  higher  wages  after  a 
tax  or  other  circumstance  should  have  raised  the  price  of  neces- 
saries. But  what  are  the  facts  ?  Speaking  of  the  time  of  Eliza- 
beth, Thorold  Rogers  says:  "Prices  rose  150  per  cent.,  and  the 
wages  of  labor  were  almost  stationary.  Wages  do  not  rise  with 
prices.  To  assert  that  they  do,  or  will,  is  either  ignorance  or  dis- 
honesty."— Economic  Interpretation  of  History  (N.  Y.,  1888), 
p  37.  "According  to  all  experience,  whether  within  modern  ob- 
servation, or  recorded  by  history,  it  may  be  laid  down  as  an  estab- 
lished maxim,  that  labor  is  the  last  of  the  objects  of  exchange  to 
rise  in  consequence  of  dearth  or  depreciation,  and  that  conversely 
the  price  of  labor  is  last  to  fall  in  consequence  of  increased  abund- 
ance of  commodities,  or  of  increased  value  of  money." — THOMAS 
TOOKE,  A  History  of  Prices  (London,  1858)  II.,  p.  71.  In  Spain, 
"the  influx  of  specie  [from  Mexico  and  Peru]  produced  a  diminu- 
tion in  the  value  of  money,  and  habits  of  lavish  expenditure  in 
the  rich;  rents  were  raised,  all  the  necessaries  of  life  advanced 
in  price,  and  of  the  wealth  poured  into  the  country  in  full  streams, 
all  that  reached  them  was  in  the  shape  of  more  abundant  aims, 
which  made  them  more  dependent  than  they  were  before,  without 
preventing  them  from  being  more  miserable." — The  Same  (p. 
72)  citing  the  Quarterly  Review,  Vol.  XV.,  p.  192. 


HERTIG  ON  TAXATION.  398 

"I'll,  tell  you,"  said  in  substance  Ferdinand  Lassalle  to  the 
Prussian  judges,  "when  and  how  a  tax  that  raises  the  price  of 
bread  raises  also  the  laborer's  wage.  When,  as  in  Ireland  and 
with  the  Indian  ryot,  wages  are  already  at  the  lowest  subsistence 
point,  then  in  truth  a  higher  price  for  grain  is  followed  by  a 
higher  wage.  The  higher  price  means  hunger,  special  diseases 
for  the  underfed,  atrophy,  starvation.  I  reier  you  to  Malthus, 
to  Mill's  History  of  India,  to  Raynal's  work  on  the  Indies.  We 
know  these  phenomena  at  home  under  the  name  of  the  'Silesian 
Weavers'  Typhus.'  And  now  when  the  destroying  angel  has 
raged  long  enough  among  the  workers,  when  the  'preventive 
and  destructive  checks'  oi  Malthus  have  thinned  their  ranks 
enough,— then,  my  lords,  ah  then,  with  the  supply  of  workers 
cut  down  to  correspond  with  the  demand,  will  wages  rise  to  the 
point  of  representing  the  indispensable  necessaries  of  life!"  And 
he  charges  the  "augurs  of  science,"  the  professors,  with  re- 
luctant and  reticent  knowledge  of  these  facts.  But  many  of  the 
professors,  at  least  of  the  more  modern  ones,  have  done  good 
work  in  criticising  the  general  and  absolute  theories  of  the  inci- 
dence of  taxation.  Seligman,  for  instance,  concedes  that  "the 
imposition  of  a  tax  on  wages  injures  the  workman  both  tempor- 
arily and  permanently." 

"Taxation  of  the  capitalists'  share  of  the  national  income 
gives  rise  to  more  difficult  problems  than  those  connected  with 
rent.  Between  the  doctrine  of  Turgot  that  a  tax  on  profits  is 
always,  and  that  of  Ricardo  that  it  is  never  shifted,  we  have  to 
take  an  intermediate  position." — C.  F.  BASTABLE,,  Public  Finance 
(second  ed.  London,  1895),  p.  354.  This  passage  from  Prof. 
Bastable  affords  a  good  illustration  of  the  progress  that  is  cur- 
rent in  modern  professordom, — of  the  dawning  and  sometimes 
full-shining  conviction  that  absolute  theories  in  economics 
are  now  outworn.  That  things  "seem,"  or  things 
"tend,"  to  be  or  to  do  so  and  so,  is  now  as  common  a  conclusion 
with  the  professors  as  their  older-time  cock-sure  conclusion  that 
things  are,  or  things  d\o,  so  and  so.  An  "intermediate,"  or 
middle  position  is  also  taken  by  the  capitalist :  he  is  delighted 
to  have  the  incidence,  or  stroke,  of  taxation  alight  on  either 
side  of  him,  while  he,  in  the  middle,  remains  untouched.  As 
to  the  taxation  of  interest,  which  is  the  matter  directly  in  view 
by  Bastable  in  the  quoted  passage,  the  American  capitalist,  at 
least,  is  very  successful  in  holding  the  middle  position  described. 
The  current  quotations  of  ^/2  and  4  per  cent,  railroad  bonds  at 
near  and  above  par  show  that  nobody  in  the  United  States  even 
seriously  thinks  of  paying  a  tax  on  interest  as  such.  For  the 
rest,  the  system  in  general  use  throughout  the  United  States. 


394  HERTIG    ON    TAXATION. 

of  taxing  banks  and  trust  companies  by  levying  a  tax  on  their 
shares  and  on  their  realty,  exempts  from  specific  taxation  both 
the  principal  and  the  interest  of  the  notes,  bonds  and  other  like 
securities  which  they  own.  And  as  I  have  said  in  the  preceding 
chapter,  the  individual  holder  of  such  securities  cannot  be  ef- 
ficiently reached  except  by  reaching  their  source.  These  con- 
siderations apply  in  great  measure  to  all  loose,  or  very  movable, 
capital;  but,  as  Bastable  justly  observes  (p.  355),  ''capital  once 
invested,  the  difficulty  of  withdrawing  it  places  the  possessor 
for  the  time  being  in  the  same  position  as  the  landlord."  And 
so  he  modestly  concludes :  "A  tax  on  fixed  capital  would  thus 
seem  to  resemble  in  its  effects  a  tax  on  rent,  and  to  be  equally 
untransferable." — Ibid.  All  absolute  theories  of  the  incidence  of 
taxation  read  themselves  out  of  court,  so  to  speak,  at  the  outset 
and  by  the  very  statement  of  their  conditions.  The  conditions 
presuppose  uniformity  of  operation  through  uniformity  or  equal- 
ity of  the  taxes  to  which  the  theory  is  applied.  But  there  is  no 
uniformity  or  equality  of  such  or  of  any  taxes  :  they  must  vary, 
as  well  in  rate  as  in  their  effect,  according  to  the  varying  cir- 
cumstances of  the  taxpayers  and  the  varying  strictness  of  their 
enforcement.  Thus  J.  S.  Mill :  "A  tax  on  profits,  like  a  tax  on 
rent,  must  at  least  in  its  immediate  operation  fall  wholly  on  the 
payer.  All  profits  being  alike  affected  [the  impossible  result  of 
any  tax],  no  relief  can  be  obtained  by  a  change  of  employment. 
If  a  tax  were  laid  on  the  profits  of  any  one  branch  of  productive 
employment,  the  tax  would  be  virtually  an  increase  of  the  cost  of 
production,  and  the  value  and  price  of  the  article  would  rise  ac- 
cordingly ;  by  which  the  tax  would  be  thrown  upon  the  consumers 
of  the  commodity  and  would  not  affect  profits." — Principles  of 
Polit.  Econ.  Bk.  v.  ch.  iii.  Sec  3.  But  the  theory  that  a  tax 
upon  "the  profits  of  any  one  branch  of  productive  employment 
*  *  *  would  te  thrown  upon  the  consumers"  rests  likewise  on  an 
assumption  not  wholly  ungrounded  in  fact  but  insufficient  for 
the  broad  base  of  such  theory, — the  assumption  "that  the  dealer 
or  producer  had  been  obtaining  normal  profits  before  the  imposi- 
tion of  the  tax"  (Bastable,  p.  347 ),  and  that  he  would  quit  his 
"one  branch"  so  taxed  unless  he  could  now  add  the  tax  to  his 
prices,  make  sales  accordingly,  and  keep  on  "obtaining  normal 
profits."  The  assumption  is  based  on  the  underlying  assumption 
of  "perfect  mobility"  of  capital — I  borrow  the  expression  from 
Bastable — which  may  be  given  concrete  form  by  supposing  that 
if  tin-plate  makers  are  specially  taxed,  one  or  more  of  them  will 
promptly  go  to  making  hoop-iron,  which  for  the  sake  of  the 
theory  is  not  so  taxed ;  whereupon  tin-plate  will  rise  in  price,  and 
profits  become  normal  in  that  line.  But  Bastable,  as  we  have 


HERTIG    ON     TAXATION.  335 

seen  above,  is  well  aware  that  such  supposed  "one  branch"  may 
be  operated  by  fixed  capital  which  cannot  escape  the  tax,  and 
which,  as  we  know  sometimes  happens,  is  kept  at  work  in  the 
same  branch  until  its  owners  become  bankrupt.  On  the  theory 
that  monopoly  prices  yield  much  more  than  normal  profit,  it  is 
allowed  that,  "so  far  as  producers'  gains  are  at  all  of  the  nature  of 
monopoly,  taxation  will  remain  on  them/' — BASTABLE,  p.  348.  Se- 
ligman,  discussing  an  hypothetical  "uniform  tax  on  all  capital," 
which  he  frankly  states  is  "an  impossibility  in  the  modern  world," 
makes  his  argument  applicable  to  a  uniform  tax  as  well  on  all  in- 
terest as  on  all  capital,  and  concludes  that  such  tax  must  fall  on 
the  capitalist ;  for  "there  would  be  no  way  for  him  to  shift  the 
burden." 

Amongst  English-speaking  farmers,  the  expression  is  not  in- 
frequently heard,  "the  farmer  pays  for  all,"  implying  that  he 
also  pays  taxes  for  all.  It  would  be  curious  if  this  expression 
could  be  traced  to  the  doctrine  of  the  illustrious  Englishman, 
John  Locke,  who  was  prior  to  the  Physiocrats  in  propounding 
the  theory  that  taxes  finally  alight  upon  the  land.  Locke  wrote 
in  1691,  or  perhaps  the  next  year,  this  proposition  of  incidence: 
"Taxes,  however  contrived,  and  out  of  whose  hand  soever  im- 
mediately taken,  do,  in  a  country,  where  the  great  fund  is  in  land 
for  the  most  part  terminate  upon  land." — As  quoted  by  Selig- 
man,  p.  71.  In  support  of  this  view,  Locke,  in  some  respects 
anticipates  the  theories  of  Ricardo,  but  colors  them  with  the  hues 
of  life,  and  carries  their  effects  a  step  farther  than  Ricardo  cares 
to  do.  Thus,  as  to  the  effect  of  a  tax  on  the  laborer,  Locke 
says:  [Either]  "his  wages  must  rise  with  the  price  of  things, 
to  make  him  live,  or  else,  not  being  able  to  maintain  himself  and 
family  by  his  labor,  he  comes  to  the  parish  [in  modern  American, 
goes  to  the  poorhouse]  ;  and  then  the  land  bears  the  burthen  a 
heavier  way."  Note  Locke's  vivid  presentation  of  the  reason 
(better  known  in  Ricardo's  abstract  form)  why  there  can  be  no 
tax  on  laborers :  Pay  it  the  "poor  laborer  and  handicraftsman 
cannot:  for  he  just  lives  from  hand  to  mouth  already."  With 
Locke,  however,  and  reflecting  the  conditions  about  him,  the 
farmer  is  not  the  owner  of  the  land,  but  only  a  "rack-renter  or 
under  tenant,"  to  whom  it  is  "the  same  thing"  "whether  he 
pays  all  his  rent  to  the  king  or  his  landlord."  As  tenant,  his 
"bargain  and  profit  is  the  same,  whether  the  land  be  charged,  or 
not  charged  with  an  annuity"  [or  annual  tax.]  Hence,  if  the 
tax  is  laid  directly  upon  the  land,  the  owner  cannot  shift  it.  So 
also,  if  it  be  laid  on  commodities,  he  must  pay  "more  for  wages 
as  well  as  other  things,  whilst  he  sells  his  corn  and  wool ;  either 
at  the  same  rate,  or  lower,  at  the  market  (since  the  tax  laid  up- 


396  HERTIG    ON    TAXATION. 

on  it  makes  people  less  forward  to  buy),  [and]  must  either  have 
his  rent  abated,  or  else  break  and  run  away  in  his  landlord's  debt, 
and  *  *  so  the  yearly  value  of  the  land  is  brought 

down,  and  who  then  pays  the  tax  at  the  year's  end  but  the  land- 
lord?"— Id.  p.  72.  Locke  is  as  emphatic  as  any  that  came  after 
him  in  affirming  that  a  tax  on  commodities  raises  the  price  to 
the  consumer:  "Tis  plain  the  merchant  and  broker  neither  will 
nor  can  [pay  such  tax]  ;  for  if  he  pays  more  for  commodities 
than  he  did,  he  will  sell  them  at  a  price  proportionately  raised." 
In  a  famous  passage  which  Seligman  says  "is  the  first  instance  in 
English  literature  of  any  allusion  to  the  term  'direct  taxes/' 
Locke  puts  it  to  the  landlord  to  decide  whether  to  pay  "the 
public  charges"  straight,  or  through  his  tenant,  and  thereby 
receive  a  lower  rent:  "The- merchant  (do  what  you  can)  will 
not  bear  it :  the  laborer  cannot,  and  therefore  the  landowner  must ; 
and  whether  he  were  best  to  do  it,  by  laying  it  directly  where 
it  will  last  settle,  or  by  letting  it  come  to  him  by  the  sinking  of 
his  rents,  which  when  they  are  once  fallen,  every  one  knows  are 
not  easily  raised  again,  let  him  consider." — Id.  p.  73. 

It  is  noteworthy,  in  connection  with  Locke's  or  any  theory  of 
the  absolute  incidence  of  taxes  on  land,  that  Ferdinand  Lassalle, 
the  Hebrew  socialist  agitator  (the  romance  of  whose  life  and 
death  George  Meredith  has  so  admirably  turned  to  artistic  use  in 
The  Tragic  Comedians),  took  the  ground  that  indirect  taxes  are 
the  means  used  by  the  dominant  classes  of  society,  the  Haves,  to 
shift  the  burden  of  taxation  from  their  own  onto  the  shoulders 
of  the  poor,  the  Have-nots, — meaning  by  indirect  taxes  not  only 
the  ordinary  taxes  on  consumption,  or  on  commodities,  cut  also 
taxes  on  business  and  land  (die  Gewerbesteuern  und  die  Grund- 
'steuern),  which  he  held  to  be  shifted  to  the  shoulders  of  the  poor, 
who  in  Prussia  had  not  sunk  so  low  as  the  Irishman  at  home  and 
the  Indian  ryot,  but  could  still  yield  up  a  little  more  before  reach- 
ing the  -starvation  point.  Using  the  public  revenues  of  Prussia 
for  1855,  as  the  basis  of  his  argument,  he  maintained  that  out  of 
the  total  revenues  for  that  year,  that  is,  108,930,000  thaler,  de- 
ducting the  state's  income  from  its  lands,  etc.,  11,967,000  thaler, 
and  income  taxes,  etc.,  which  he  held  to  be  direct,  12,848,000 
thaler,  there  would  remain  in  round  numbers  85,000,000  thaler, 
to  be  put  down  as  the  total  of  the  Prussian  indirect  taxes  for  that 
year.  Lassalle's  book-keeping  differed  from  that  of  the  state  in 
that  he  put  down  as  indirect  taxes  land  taxes  amounting  to  10,- 
000,000  thaler  ''which  indeed  had  been  directly  collected  from  the 
landowner  hut  bv  the  latter  had  been  shifted  onto  prain  prices 
and  so  had  finally  been  paid  by  grain  consumers  ;"  differed  also 
in  that  Lassalle  put  down  as  indirect  the  business,  or  privilege. 


HERTIG    ON    TAXATION.  397 

tax  of  2,900,000  thaler.  As  every  one  must  consume,  and  the 
poor  on  account  of  their  relatively  greater  numbers  not  only  con- 
sume in  the  aggregate  much  more  than  the  rich,  but  each  poor 
family  consumes  individually,  and  must  consume  nearly  the 
whole  family  income, — indirect  taxes  are  therefore  a  monstrous 
engine  of  oppression  by  which  the  bourgeoisie  exploit  the  poor. 
For  putting  forth  such  doctrine  based  on  the  above  figures,  the 
Prussian  authorities  prosecuted  Lassalle  criminally  for  "endan- 
gering the  public  peace  by  stirring  up  the  inhabitants  of  the  state 
to  hatred  and  contempt  of  each  other."  The  lower  court  found 
him  guilty,  sentenced  him  to  four  months'  imprisonment  and  to 
pay  the  costs,  besides  ordering  the  destruction  of  all  copies  of 
the  address  in  which  he  had  put  forth  the  doctrine  in  question 
The  court  of  appeal,  however,  commuted  the  sentence  into  a  fine 
of  100  thaler,  which  result  was  considered  a  triumph  for  Lassalle. 
It  is  from  the  pamphlet  embodying  his  former  utterances  and  in- 
tended to  be  read  before  the  appellate  court  that  I  have  taken  the 
above  figures,  and  made  the  paraphase  further  above  quoted, 
telling  how  a  tax.  on  the  necessaries  of  life  raises  wages,  when 
it  does  raise  them.  Lassalle  was  a  powerful  "controversialist,  and 
the  doctrine  as  put  forth  by  him  may  be  regarded  as  little  less  ef- 
fective for  conviction  than  if  it  were  strictly  true.  Single-taxers, 
like  Thomas  G.  Shearman,  are  as  declamatory  of  the  evils  and  in- 
cidence of  indirect  taxation  as  was  Lassalle.  There  is,  how- 
ever, nothing  original  or  striking  in  Lassalle's  views  that  the 
Prussian  land  tax  of  his  day  was  an  indirect  tax  and  finally 
alighted  on  the  consumers  of  grain.  He  based  it  on  the  doctrine 
of  Ricardo,  "but  if  a  land-tax  be  imposed  on  all  cultivated  land, 
however  moderate  that  tax  may  be,  it  will  be  a  tax  on  produce, 
and  will  therefore  raise  the  price  of  produce/'  Lassalle's  editor, 
however,  points  out  that  Ricardo's  dictum  rests  on  the  supposi- 
tion that  the  grain  market  be  naturally  or  artifically  limited,  which 
was  not  the  case  in  Prussia  at  the  time  of  which  Lassalle  spoke, 
there  being  then  and  there  free  trade  in  grain ;  hence  the  Prussian 
land-tax  could  not  unconditionally  be  held  to  have  the  effect  of 
an  indirect  tax. 

A  tax  on  land  is  as  good  as  any  to  use  for  showing  those  sim- 
pler and  more  practical  workings  of  incidence  which  are  not  be- 
yond every-day  capacity  and  which  all  ought  to  bear  in  mind.  If 
any  man  fairly  well  content  with  modern  conditions  of  industry 
and  luck,  has  thriven  and  made  money,  and, desires,  let  us  sup- 
pose, to  lead  the  life  of  a  country  gentleman,  or  independent  far- 
mer in  any  of  the  prosperous  rural  counties  of  Minnesota,  for 
instance,  that  one  which  had  the  lowest  tax  rate  in  1901  (pp.  118- 
120,  above),  we  may  suppose  him  to  buy  a  section  of  land  there 


398  HERTIG  ON  TAXATION. 

at  $40.00  per  acre,  or,  in  round  numbers,  at  three  times  the  aver- 
age assessed  value  of  acres  in  that  county  (^$13.55),  bringing" 
his  primary  investment  to  $25,600.  He  has  duly  weighed  the  fact 
that  the  taxes  for  1901,  on  said  section,  at  16.8  mills  on  the  dol- 
lar of  assessed  valuation  were  $130.  If  he  assumes  that  taxes 
there  will  be  steady  and  average  the  same  sum  on  his  section 
thenceforward,  and  that  money  is  worth  to  him  6  per  cent.,  he 
may  look  upon  the  annual  tax  charge  as  if  it  were  the  interest 
of  a  perpetual  mortgage  having  a  principal  of  $2,166.67.  By  tak- 
ing that  sum,  and  making  it  earn  6  per  cent.,  it  will  just  clear 
his  taxes.  If  he  could  commute  his  taxes  by  -paying  them  once 
for  all,  and  receive  the  guaranty  of  the  state  that  his  land  should 
thereafter  remain  untaxed,  he  might  be  willing  to  pay  $2,500,  or 
i-io  of  what  the  land  cost  him;  or,  if  the  one  who  sold  to  him 
had  had  the  like  guaranty  from  the  state,  he  would  have  will- 
ingly added  that  $2,500  to  his  purchase  price.  It  is  apparent, 
therefore,  that  in  buying  the  land,  always  supposing  him  to  have 
thought  of  all  these  things,  he  knew  that  he  was  buying  only 
10-11  of  its  net  use,  or,  as  people  commonly  say,  was  buying 
an  "equity"  equal  in  value  to  10-11  of  the  full  value.  But, 
whether  he  thought  of  all  these  things  or  not,  they  were  self- 
registering  in  effect,  and  he  bought  and  paid  for  just  the  equity 
mentioned  and  no  more.  Technically,  therefore,  the  public  auth- 
orities may  be  regarded  as  coproprietors  with  him,  and  as  claim- 
ing and  taking  annually  the  rental  value  of  i-n  of  the  whole, 
commuted  as  above  said  into  an  annual  payment  of  $130.  But  on 
this  state  of  facts  the  actual  interest  which  he  bought  in  his  sec- 
tion will  remain  forever  untaxed.  Such  exemption  from  taxa- 
tion is  called  in  the  books  the  effect  of  "capitalization  of  the 
tax ;"  and  some  writers  have  held  that  "because  of  this  capita-- 
ization,  a  land  tax  is  no  tax  at  all." — SELIGMAN,  p.  139.  Our  pur- 
chaser of  the  section  being,  according  to  the  hypothesis,  a  man 
"fairly  well  content  with  modern  conditions,"  and  having  thriven 
under  them,  cannot  be  heard  to  complain  that  the  $2,500  which 
he  withheld  from  paying  because  of  the  state's  perpetual  inter- 
est in  the  land  had  already  been  taken  elsewhere  from  his  private 
fortune  by  the  state ;  nor  can  he  be  heard  to  complain  of  the 
seeming  tax  on  his  section,  since  he  is  merely  the  agent  £>f  the 
state  in  collecting1  it  from  himself  or  from  his  tenants  and  in 
paying  it  over.  But  now  if  his  county  treasurer  should  default 
in  the  sum  of  $50,000  or  any  sum,  and  the  same  should  not  he 
recovered;  or  if  the' county  and  school  officials  should  make  in- 
discreet expenditures  on  roads,  bridges,  county  buildings, 
school-houses  and  the  like  (say  50  per  cent,  in  excess  of  actual 
needs  or  of  usable  value),-  then  to  the  extent  of  his  pro  rata  share 


HERTIG    ON     TAXATION.  399 

of  such  default  or  excess,  our  purchaser  of  the  section  is  taxed 
beyond  peradventure,  and  he  cannot  shift  the  tax.  It  is  as  if,  on 
going  to  pay  the  state  its  usual  $130.00,  he  had  been  robbed  of  the 
same  or  a.  portion  thereof,  and  had  to  make  good  the  robbery. 
That  which  we  plainly  see  can  have  no  appreciable  influence  on 
his  markets  or  other  opportunities,  and  which,  as  money,  might 
just  as  well  have  been  saved  as  not,  is  clearly  a  tax  whiich  re- 
mains on  the  payers.  If,  on  the  other  hand,  our  supposed  tax- 
payer is  a  practical  reformer,  becomes  influential  in  his  new 
county,  and  through  his  efforts  local  expenditures  are  cut  down, 
so  that  his  taxes  are  less  than  $130.00  per  year,  he  has  suc- 
ceeded, for  the  time  in  wresting  an  additional  equity  from  the 
state,  and  the  incidence  of  the  pro  rata  amount  of  such  saving  is 
just  as  plainly  on  him  as  the  above-supposed  pro  rata  of  in- 
creased taxes  would  be  upon  him.  Moreover,  if  he  is  public-spir- 
ited as  well  as  thrifty,  he  may  point  out  the  need  of  increased  ex- 
penditures, and  such  increase  may  follow  therefrom ;  in  which 
case,  too,  the  incidence  of  his  pro  rata  of  the  increase  is  plainly 
upon  him,  and  there  can  be  no  shifting ;  but  it  is  like  the  incidence 
of  the  seed  corn  which  he  plants  in  his  fields — he  expects  it  to 
alight  on  him,  and  to  his  advantage  in  the  future.  To  the  extent 
also  that  the  $130.00  of  ordinary  annual  tax  is  discreetly  ex- 
pended, the  public  authorities  give  to  him  the  substantial  own- 
ership of  the  state's  one-eleventh  of  his  section.  In  the  supposed 
case,  as  local  to  Minnesota,  only  one-eighth  (cut  down  this  year 
to  probably  one-tenth)  of  the  $130.00  goes  to  the  state  treas- 
ury ;  the  remainder  is  expended  within  his  county,  and  if  not  dis- 
creetly expended  neither  cause  nor  remedy  is  far  to  seek.  The 
$16.00  or  $13.00  going  out  of  the  $130.00  into  the  state  treasury 
ought  to  be  precious  in  his  eyes  as  evidence  of  how  light  the  bur- 
den of  state  government  can  be  made,  and  as  offering  some 
guaranty  that  such  burden  will  continue  light. 

In  the  case  supposed,  we  have  been  able  to  follow  the  inci- 
dence, because  we  have  been  able  to  follow  the  facts ;  have  been 
able  to  follow  them  because  able  to  isolate  them,  without  wrench- 
ing them  away  from  important  modifying  facts,  whose  influence 
would  continue  though  neither  measured  nor  measurable.  But 
when  we  proceed  further,  and  ask  what  taxes,  if  any,  our  man 
pays  to  the  government  at  Washington,  the  answer  is  not  so 
easy.  When  there. is  a  stamp  tax  on  bank  checks,  telegrams  and 
the  like,  he  will  be  able  to  tell  accurately  some  items  of  federal 
taxation  whose  incidence  is  on  him.  Whether  his  hired  men  use 
whiskey  and  tobacco  or  not,  it  is  probable  that  the  wages  he  pays 
them  are  somewhat  higher — how  much  no  man  can  tell — on  ac- 
count of  federal  taxes  on  these  commodities,  because,  in  theory, 


ioo  HERTIG    ON     TAXATION. 

their  use  enters  into  the  standard  of  living  which  stands  in  some 
relation  to  the  average  wage.  If  there  is  a  duty  on  coffee,  and 
an  act  of  congress  soon  to  take  effect  with  intent  to  give  "a  free 
breakfast  table,"  he  may  make  a  nice  calculation  in  advance  as  to 
how  much  it  will  save  him  on  coffee — only  to  learn  with  more 
or  less  chagrin  a  few  weeks  later  that  Brazil  has  taken  advantage 
of  our  act  of  congress  by  laying  an  export  duty  on  the  fragrant 
berry,  and  that  coffee  is  only  a  shade  lower  since  our  duty  was 
taken  off — an  actual  occurrence  of  the  year  1880.  He  may  or 
may  not  know  that  one  of  the  exploded  sophisms  of  free  trade  is 
that  "when  foreign  countries  protect  any  class  of  manufactures 
they  thereby  acknowledge  that  they  cannot  compete  with  us  [the 
English]  in  our  own  or  in  any  neutral  markets,  and  that  by  the 
conditions  of  the  problem  it  is  impossible  that  they  should  do  so ;" 
but  yet  may  be  aware  of  the  fact  that  as  long  ago  as  1877  the 
imports  of  manufactured  goods  into  Great  Britain  were,  includ- 
ing metals,  to  the  amount  of  64,635,418  pounds  sterling — goods 
almost  the  whole  of  which  were  "protected"  in  the  countries  ex- 
porting them.  But  if  an  expert  accountant,  and  especially  if  fa- 
miliar with  large  affairs,  he  will  know  that  there  is  a  considerable 
difference  between  the  factory  cost  of  goods  and  such  cost  plus 
a  pro  rata  of  fixed  charges  which  go  on  whether  the  factory  runs 
or  not ;  and  will  find  it  entirely  simple  and  natural  that  Alfred 
R.  Wallace  should  write  in  the  Nineteenth  Century  for  July, 
1879,  that  most  of  the  protected  goods  sent  to  England  are  sent 
there,  in  fact,  "because  they  afc  protected,  the  manufacturers 
finding  it  to  their  advantage  to  work  to  the  full  power  of  their 
plant  and  capital,  selling  the  larger  portion  of  their  output  at  a 
good  profit  in  the  home  market,  and  with  the  surplus  under-sell- 
ing us  which  they  are  enabled  to  do,  because  all  the  fixed  charges 
of  the  manufacturers  are  already  paid  out  of  the  profits  of  the 
domestic  trade."  In  such  case,  too,  he  will  not  be  surprised  to 
learn  that  French  silks  can  be  bought  in  New  York  at  con- 
siderably less  than  the  ordinary  price  of  the  like  goods  in  France 
added  to  our  duty  on  the  same ;  and  may  be  quite  willing  to  let 
the  professors  sness  at  what  the  like  silks  would  cost  if  our 
"barbarous  tariff"  were  accommodated  to  professorial  "ideals. 
Before  clamoring  to  attack  trusts  from  the  tariff-reform  sally 
port,  he  might  consider  such  facts  as  that  "Marshall  Field,  the 
leading  importer  and  dry-goods  merchant  of  Chicago,  stated  in 
1882  that  in  all  ordinary  woolen  and  cotton  goods,  for  common 
wear  by  the  business  men  and  working  classes,  the  American 
market  "(though  surrounded  by  an  average  45  per  cent,  tariff)  is 
the  cheapest  market  in  the  world ;"  might  desire  to  get  at  the  bot- 
tom facts  regarding  current  prices  which  correct  statements 


HERTIG    ON    TAXATION.  401 

would  give  covering  a  wider  range  than  Marshall  Field's ;  and 
might  reflect  that  the  usual  dense  ignorance  not  only  as  to  what 
comparative  prices  are  but  also  as  to  what  elements  in  what  pro- 
portion enter  into  them,  is  the  worst  possible  foundation  for  an 
opinion  as  to  what  prices  ought  to  be.  He  might,  in  the  end  be 
uncertain  whether  in  his  particular  situation  he  paid  any  federal 
taxes  at  all,  and  regret  only  that  the  government  at  Washington 
does  not  use  with  quite  the  best  discretion  its  vast  revenues.  If 
a  reader  of  this  book,  it  might  occur  to  him  that  if  the  trusts  can 
defeat  a  well-directed  effort  to  make  them  treat  their  employes 
right,  treat  the  public  right,  and  pay  a  handsome  tax  out  of  the 
right  profits,  they  will  be  equally  successful  in  defeating  any 
scheme  of  tariff  reform  that  shall  call  out  their  opposition ;  and 
that  it  will  save  a  good  deal  of  time  to  find  out  the  extent  of  their 
and  our  power  by  moving  on  the  right  lines  from  the  start. 

One  of  the  practical  questions  in  the  incidence  of  taxation 
that  need  not  be,  yet  generally  is,  neglected,  is  the  question  aris- 
ing in  particular  cases, — why  is  there  no  incidence  at  all?  Why 
does  the  tax  yield  no  revenue  ?  Take,  for  instance,  the  attempted 
tax  on  grain  in.  elevators  in  North  Dakota,  pp.  191-193,  above. 
I  mention  it  merely  in  further  illustration  of  the  fact  that  when 
we  can  follow  the  facts,  until  they  become  too  complex  and  too 
numerous,  we  can  follow  also  the  incidence  and  non-incidence  of 
the  tax.  I  have  mentioned  above,  p.  370,  that  in  Erie  county, 
New  York,  the  assessed  value  of  personal  property  for  a  given 
year  is  less  than  four  per  cent,  of  the  aggregate  value  of  realty 
and  personalty  there !  Now  the  very  important  port  and  city  of 
Buffalo  are  in  that  very  county.  There  are  vast  elevators,  right 
in  the  main  highway  of  Northwestern  commerce.  Does  anybody 
suppose  that  grain  in  those  elevators  pays  any  tax,  or  has  any 
assessed  value  there  ?  Not  a  bit  of  it.  Useless  to  study  the  New 
York  code  on  taxing  personal  property :  that  code  is  strictly  car- 
rying on  its  main  function — getting  its  tax  provisions  evaded ! 
Saying  nothing,  for  the  present,  of  the  protection  to  grain  by  its 
exemption  from  tax,  while  in  transit ;  saying  nothing  of  the  faci- 
lities offered  for  carrying  wheat  tax-free  in  Duluth  and  in  her 
sister  citv  hard  by  in  Wisconsin,  Buffalo  itself,  without  those 
other  facilities,  is  practically  a  sufficient  reason  why  any  attempt 
to  assess  and  tax  grain  at  full  value  this  side  of  there,  is  doom- 
ed to  failure.  Moreover,  to  the  extent  of  the  cost  occasioned  by 
the  inconvenience  of  dodging-  the  ^rain  tax  and  by  the  conse- 
quent loss  of  the  otherwise  fuller  use  that  might  be  made  of  local 
elevators,  the  North  Dakota  farmer  is  taxed  on  his  grain  through 
the  short-sightedness  of  his  legislature ;  and  this  tax,  whatever 
it  mav  be  neither  vields  revenue  nor  can  be  shifted.  It  stays  on 


402  HERTIG    ON     TAXATION. 

the  farmer.  Considerations  like  these  ought  to  move  to  the  re- 
pealing of  foolish  grain-taxing  laws  and  to  blocking  the  proposed 
enactment  of  like  laws  in  any  of  the  Northwestern  states. 

The  most  important  general  fact  in  incidence,  one  that  can- 
not be  eliminated  where  questions  of  incidence  take  a  wide  range, 
is  that  taxes  are  always  unequal.  This  is  in  no  case  more  true 
than  where  the  tax  has  the  seeming  of  equality  as  in  license  taxes. 
Where  a  license  tax  is  in  the  same  sum  for  all  engaged  in  the 
business  so  taxed,  it  may  prompt  those  engaged  therein  to  strug- 
gle at  the  old. prices  for  a  greater  volume  of  trade  than  they  had 
before  the  license  was  imposed,  to  recoup  themselves  by  larger 
sales  for  smaller  profits  on  individual  transactions.  Here  the 
consumer  does  not  pay  the  tax,  but  rather  those  who  are  crowded 
out  of  business  and  lose  the  whole  or  a  portion  of  their  capital 
in  quitting.  The  American  states  may  be  called  different  coun- 
tries having  a  common  external  tariff,  substantially  a  common 
market  and  absolute  free  trade  with  each  other.  Here  the  actual 
fact  and  the  importance  of  inequality  of  taxation  are  very  appar- 
ent. Where  the  general  conditions  of  the  race  are  much  the  same, 
special  and  sudden  handicaps  put  promptly  out  of  the  running 
those  on  whom  they  first  alight ;  at  least  there  is  no  way  for  the 
more  recklessly  taxed  states  and  subdivisions  to  shift  the  part  of 
the  burden  which  is  really  such,  though  in  a  more  metaphysical 
aspect  of  the  case  it  may  well  be  that  there  is  an  incidence  of  pro- 
fit on  the  wiser  states  over  and  above  what  they  directly  save  by 
prudent  taxation,  as  the  frugal  workman  may  profit  in  a  higher 
wage  by  reason  of  the  more  expensive  standard  of  living  adopted 
by  the  average  workman. 

In  practical  statesmanship,  it  should  be  ever  present  to  the 
mind  both  as  guide  and  warning  that,  as  average  human  nature 
looks  at  it,  the  incidence  of  taxation  is  just  where  at  first  glance  it 
seems  to  be, — on  the  person  taxed  and  on  the  owner  of  the  thing 
taxed.  There  is  considerable  of  sound  instinct  in  the  conclusion 
that  average  human  nature  leaps  to  on  this  subject ;  and  the  prac- 
tice of  taxation  should  conform  the  tax  laws  to  it  as  near  as  may 
be.  Where  the  people  are  wrong,  it  is  only  the  plain  facts  kept 
before  them  or  the  complex  facts  exposed  with  candor  and  sim- 
plicity that  will  set  them  right.  I  am  a  firm  believer  in  the  capac- 
ity and  the  will  of  the  people  to  take  an  advanced  course,  and  ar- 
rive at  right  conclusions,  in  the  grave  and  difficult  problems  dis- 
cussed or  mentioned  in  this  book :  they  need  only  the  right  aids, 
divorced  from  the  jargon  and  the  remoteness  of  the  schools. 


HERTIG    ON    TAXATION.  408 


GENERAL   PROPERTY  TAX   ONCE    MORE. 

[Read  in  connection  with  pp.  367-373,  above. .] 
This  book  has  much  outgrown  the  size  first  planned  for  it ; 
and,  though  it  is  not  to  be  classed  as  small,  remains  still  of  mod- 
erate compass  in  comparison  with  most  works  on  like  subject. 
Prof.  Georg  Schanz,  for  instance,  has  written  a  work  of  "prodig- 
ious proportions"  (5  large  octavo  vols.,  aggregating  more  than 
2,000  pages,  Stuttgart,  1890),  all  devoted  to  the  taxes  of  little 
Switzerland.  But  he  could  hardly  do  less,  to  carry  out  the  plan 
suggested  in  his  title,  which  is,  in  English  translation,  ''The  Taxes 
of  Switzerland  in  their  Development  since  the  beginning  of  the 
Nineteenth  Century."  Having  a  federal  government,  in  some 
respects  not  unlike  ours,  and  having  much  local  independence  with 
accompanying  distinct  taxation  in  her  twenty-five  separate  can- 
tons,— Switzerland  has  had  a  mass  of  tax  experience  in  no  way 
measured  by  her  narrow  geographical  area ;  and,  as  Seligman 
says,  she  "is  the  only  European  country  where  the  general  prop- 
erty tax  still  plays  an  important  role."  But,  "the  one  great  effort 
of  the  Swiss  legislatures  during  the  past  half-century  has  been  to 
supersede  the  general  property  tax,  not  necessarily  by  the  income 
tax,  but  by  some  form  of  income  taxation — by  some  system  which 
directly  or  indirectly  makes  not  property,  but  product,  the  basis 
of  taxation." — Essays  in  Taxation,  pp.  384-386.  "Switzerland,  like 
the  United  States,  has  tried  all  forms  of  assessment  for  the  general 
property  tax- — self-assessment  and  official  assessment,  oaths  and 
no  oaths,  publicity  and  secrecy ;  and  these  have  proved  equally 
inefficient." — Id.  387.  She  has,  however,  one  drastic  measure, 
"developed  in  the  last  few  decades,"  that  has  novel  features.  "As 
soon  as  a  taxpayer  dies,  his  entire  property  is  seized  by  the  gov- 
ernment and  held  until  an  exact  inventory  is  made.  If  this  dis- 
closes fraud  in  the  previous  self-assessments,  punitive  taxes  must 
be  paid,  rangine  in  some  cantons  over  a  period  of  ten  years. 
*  It  has  done  s^ood  service  in  increasing  the  tax  receipts, 
and  it  forms  today  one  of  the  chief  subjects  of  dispute  in  the 
Swiss  cantons." — Id.  387-388.  Such  a  measure,  however,  would 
ill  accord  with  the  legislative  tenderness  for  decedents'  estates 
shown  in  America  (p.  254, .above)  ;  and  the  superior  risror  of  the 
Swiss  is  further  shown  by  their  advanced  stand  on  inheritance 
taxes.  Switzerland  has  passed  beyond  the  collateral  inheritance 
tax ;  for  her  system  "applies  to  all  inheritances  and  bequests,  with 
a  rate  ranging  from  a  fraction  of  one  per  cent,  in  Zusr,  to  as  much 
as  twenty-five  per  cent,  or  even  more  for  non-relatives  in  Uri."- 
Id.  388. 


APPENDIX  A. 

[To  be  read  in  connection  with  statement  of  Minnesota's  area  (p.  103, 
supra)  :  also  in  connection  with  pp.  54-57,  144.] 


It  may  perhaps  please  those  who  are  fond  of  the  classification, 
"lies,  damned  lies  and  statistics,"  to  know  that  the  (N.  Y.)  World 
Ahnanac  for  1902,  gives  Minnesota's  area  as  79,997  square  miles; 
the  (N.  Y.)  Tribune  Almanac  for  the  same  year,  79,205  square 
miles;  the  (N.  Y.)  World  Almanac  for  1901,  86,335  square  miles; 
the  Century  Cyclopedia  of  Names,  83,365  square  miles  ;  the  official 
report  of  the  state  Geological  survey,  84,286  square  miles !  Vol- 
taire's line  of  verse, 

"And  that's  the  very  way  they  write  you  history !" 
is  classical.  The  average  man,  certainly  the  average  hack,  employed 
on  dictionaries  and  encyclopedias,  abhors,  or  rather  has  no  need  of 
the  exact  fact.  It  is  said  that  Caleb  Gushing  marked  for  the  sur- 
prised publishers  some  5,000  errors  in  a  Webster's  unabridged  dic- 
tionary. However  that  may  be,  it  is  certain  that  the  big  loose- 
jointed  dictionaries  and  encyclopedias  that  publishers  parade,  and 
owners  fancy,  as  "up  to  date,"  are  so  far  unreliable  that  the  careful 
worker  will  fear,  even  where  he  perforce  trusts  them.  I  fancy 
that  any  greasy  Jew  money-changer  could  tell  you,  if  he  would, 
the  weight  and  fineness  of  a  silver  rouble.  For  complete  darkness 
on  this  point  and  for  slipshod  statements  of  value  that  could  hard- 
ly be  better  in  their  kind  if  inspired  by  conscious  desire  to  take 
the  booby  prize,  consult  the  big  dictionaries,  beginning  with  the 
Century  and  thence  up  or  down,  according  as  you  grade  the 
others.  You  read  of  a  ship  anchoring  in  a  certain  road,  think  of 
the  Monitor-Merrimac  battle  in  Hampton  roads,  perhaps  recall 
road  as  used  in  "The  Two  Gentlemen  of  Verona."  You  would 
pare  the  haziness  from  your  notion  of  maritime  road  with  the 
ed^e-tools  for  such  surgery  to  be  found  in  the  Century  Dictionary. 
Here  is  the  Century  definition,  flanked  by  three  illustrative  ex- 
tracts,— a  definition  telling  you,  in  substance,  that  a  road  is  any  old 
unsheltered  water  surface  near  shore,  "where  vessels  may  an- 
chor !"  Here  are  the  very  words  of  the  Century  definition,  to 
prove  my  paraphrase :  "A  place  near  the  shore  where  vessels  may 
anchor,  differing  from  a  harbor  in  not  being  sheltered."  As  dic- 
tionary-makers borrow  and  steal  from  each  other,  the  reader,  if 
curious,  can  trace  the  delicious  evolutionary  leaps  and  bounds  by 


HERTIG    ON    TAXATION.  405 

which  the  Century  hack  finds  a  road  for  the  wave-tossed  skipper 
off  Cape  Hatteras,  off  the  Skelligs,  or  off  anywhere, — wind  and 
weather  permitting.  I  take  the  liberty  of  inserting  a  few  words  of 
my  own,  bracketed,  in  the  following  quoted  illustrative  definitions 
of  road  maritime: 

"A  place  [what  kind  of  place?]  where  ships  may  ride  at  an- 
chor at  some  distance  from  the  shore/' — WEBSTER,  Unabridged 
Die.  Another  question  suggested  by  the  above  and  by  the  follow- 
ing definition, — Is  some  a  cable's  length  or  what?  Do  ships  some- 
times ride  at  anchor  on  shore  ?  Is  there  no  road  where  ships  close- 
ly hug  the  shore  ?  Now,  try  this :  "A  place  at  some  distance  from 
the  shore,  where  vessels  may  ride  at  anchor." — WORCESTER,  big 
Dictionary,  citing  Dana,  presumably  as  authority  for  the  defini- 
tion, but  giving  no  quotation.  A  somewhat  better  definition  than 
either  of  the  foregoing  is  given  in  a  dictionary  (Stormonth's) 
published  by  the  virtuous  Harpers  before  their  financial  downfall. 
That  definition  inserts  "safely"  before  "ride  at  anchor;"  but  hav- 
ing no  limitation  of  why  or  where  is  still  incomplete.  The  Web- 
ster and  Worcester  definitions,  vague  and  foolish  as  they  are,  evi- 
dently form  the  groundwork  of  the  Century,  definition ;  only  the 
Century  lexicographer  rashly  attempted  to  cure,  after  a  fashion, 
that  vagueness.  His  reader  and  his  unlucky  star  furnished  him 
with  an  ancient  reference,  "Harbours  they  have  none,  but  exceed- 
ing good  Rodes"  and  with  a  hack-clincher  from  B.  Taylor, — 
"The  anchorage,  however,  is  an  open  road,  and  in  stormy  weather 
it  is  impossible  for  a  boat  to  land."  Thus  furnished,  he  begot  his 
definition,  and  launched  a  lexicographical  lie,  gross  and  palpable. 
The  world  has  some  famous  roads;  the  better  the  road,  the  surer 
shelter  it  affords.  Only  a  road  is  not  land-locked  like  an  ideal  har- 
bor ;  it  is  in  general  open  to  wind  and  wave  in  certain  directions. 
According  to  Littre  the  French  call  a  good  south  road,  one  where 
there  is  shelter  from  the  south  wind.  Littre's  general  definition  of 
road  (rade)  is  "an  extent  of  sea  fenced  in  part  by  land  more  or 
less  elevated  and  affording  anchorage  sheltered  from  wind  and 
wave  coming  in  a  certain  direction."  Bayard  Taylor  had  doubtless 
seen  many  a  road,  and  his  use  of  open  in  such  connection  ought 
to  have  been  evidence  to  anybody  except  American  dictionary  and 
magazine  hacks  that  an  open  road  connotes  roads  a  good  deal  less 
open. 

Let  a  gross  blunder  once  lodge  in  a  big  dictionary ;  and,  if  one 
not  likely  to  shock  numerous  readers,  it  has  an  excellent  show  for 
perpetuity.  A  seaman  would  hardly  take  the  trouble  to  find  out 
what  a  land-lubber  fancies  a  road  to  be ;  and  the  land-lubbers  have 
evidently  been  satisfied  to  know  that  it  means  some  place  where 
ships  may  anchor.  '  Now  this  Century  blunder  has  already  got  it- 


406  HERTIG    ON     TAXATION, 

self  "conveyed"  in  Pistol's  sense  to  another  big  dictionary — the  so- 
called  Standard  of  Funk  &  Wagnalls.  Their  hack  had  evidently 
sublime  confidence  in  the  Gilder  gang ;  and  his  strenuous  effort  to 
"convey"  the  pith  of  prior  definitions  under  original  rearrange- 
ment of  their  bark  is  almost  amusing.  Thus  :  "an  open  place  [open 
to  what?]  at  some  distance  from  the  shore,  [he  mildly  resents  as 
not  quite  elastic  enough  the  Gilderian  near  "the  shore,"  and  so 
prefers  Webster],  where  ships  may  ride  at  anchor;  not  sheltered 
like  a  harbor  [in  this  slightly  disguised  conveyance  the  hack  made 
an  unconscious  random  shot  only  "some  distance  from"  the 
truth]  ;  a  "roadstead."  This  last  word  is  defined  in  turn,  with 
careful  retention  of  the  Century. precision,  as  "a  place  of  anchor- 
age off  shore  without  harbor  protection." 

As  to  the  Century'  definition,  it  does  not  a  priori  seem  quite  im- 
possible that  the  editor  of  the  magazine  so  named  and  the  hack 
of  the  so-named  dictionary,  exchanged  places  once  in  a  while,  and 
specially  for  this  occasion.  Or  we  may  indeed  surmise  that  Mr. 
Richard  Watson  Gilder,  master  of  the  Century  crew,  and  so  hu- 
mane, it's  said,  that  he  weeps  over  some  four  hundred  and  eighty- 
eight  manuscripts,  all  equally  fit  for  his  magazine,  yet  all  doomed 
each  month  to  rejection, — simply  gave  to  some  tired  hack  a  breath- 
ing spell,  made  easy  transition  from  rhythmic  words  about  words 
to  prosy  words  about  words,  and,  leaning  on  the  Webster  and 
Worcester  props  aforesaid,  himself  mapped  out  the  roadless  road 
of  the  Century  definition. 

The  soulful  sonnets  published  under  Mr.  Gilder's  name  will 
hardly  be  claimed  for  any  one  else  275  years  hence.  In  any  event, 
I  hasten  to  be  a  far  better  witness  for  him  than  the  much-quoted 
Meres  dared  to  be  for  Shakespeare :  I  am  firmly  convinced  that 
Mr.  Gilder  is  himself  the  "only  begetter"  of  the  Gilder  sonnets, 
in  the  plain  straight  meaning  of  "begetter,"  and  that  he  did  not 
buy  the  right  to  parade  as  their  author  from  Edna  Dean  Proctor, 
Ella  Wheeler  Wilcox,  Lottie  Linwood,  or  any  other  that  I  could 
mention.  But  he  owes  it  to  himself  to  make  the  title  to  his  dic- 
tionary labors  equally  clear.  It  would  be  edifying  to  know  that 
he  rested  himself  on  dictionary  work  after,  let  us  suppose,  the 
pleasing  punishment  he  had  just  borne  in  giving  birth  to  some 
such  sonnets  as  these : 


HERTIG    ON    TAXATION.  407 


DOUBTS  AND  QUESTIONINGS. 

My  father  was  a  preacher;  so  am  I  his  son, — 

Conclusion  pregnant  of  a  comma  which  I  now  accouch. 
But  halt,  self-scrutinizer ;  needs  her  virtue  one? 

Nay,  rather  let  unpointed  inference  avouch 
The  mother  heart  beat  true  !    Fie  on't,  oh  fie, 

That  pride  in  such  poor  quip  holds  sponge  from  such  bare 

question ! 
I  said  my  father: — he  flatly  let  them  fry 

In  plain  hell-fire  ; — I  tip  to  them  suggestion. 
He  dared  them  go  to  Hell ;  I  dare  "to  be  pure," 

To  conquer  "civic  wrong;"  patter  of  "journey  trod  upward;" 
Like  Browning,  praise  the  sting,  smart,  lash — cock-sure 

Balm  for  all  somewhere — beware  of  drifting  tupward — 
Damn  us  moderns  anyway :     "Cupid's  nectar  cup" — 
Ithic-ethic  all  our  lay — "downward  and  not  up!" 

AN  EXCURSION  TO  HELLAS,  WHEREIN  NEW  BLOOD  FOR  ODYSSEAN 

TRENCH. 

Nay — I  will  this  once  talk  plain.     "Sweet"  and  "dear," 

"Dear  heart,  sweet  heart," — burden  of  Bok's  bosh  and  mine, — 
Let  be.     If  in  thes-e  dreams  seem  spirits  near — 

Help,  Prospero  and  Ariel's  cloven  pine — 
"Free  from  the  impertinence  and  warp  of  flesh," 

Though  this  same  pen  has  praised  them,  bide  they  must, 
To  yield  my  question  answer. — Thou,  Cressid,   fresh 

To  view  as  when — poor  blooming  Cefeus  lipped  for  lust — 
Thou  Troilus  madest  happy,  speak,  oh  speak, 

Tongue  quickening  first  with  sip  of  heart's  pure  blood ;- — 
Say  if  "talks  with  girls,"  where  preachments  tart  or  meek 

Mouth  matron  and  mould  maid,  had  done  you  any  good ; 
Say  if  reading  mine  or  Harpers'  monthly  rot 
Had  spared  you  levying  blackmail,  or  what? 


APPENDIX  B. 


PERTAINING  TO  MATTERS  CIVIL. 

Several  years  ago  I  projected,  and  wrote  articles  of  incorpora- 
tion for,  a  proposed  institution  of  civil  education,  to  be  called 
"The  Civil  Institutes  of  Minnesota,"  and  to  have  the  powers  and 
privileges  of  an  incorporated  college,  or  educational  society,  with- 
in the  state  mentioned.  The  matter  was  not  carried  beyond  some 
private  discussion  as  to  trustees  and  endowments  between  myself 
and  a  few  friends ;  and  I  thought  it  better,  at  least  for  a  time,  to 
carry  on  in  a  different  way  certain  of  the  work  then  planned.  The 
limitations,  then,  of  "professors,"  as  occasionally  mentioned  or 
implied  in  the  foregoing  pages,  is  no  new  subject  for  me;  but  I 
hasten  to  add  that  I  do  not  lack  in  appreciation  of  the  good  work 
that  many  of  them  are  doing  in  spite  of  the  defects  in  college 
ideals,  college  systems  and  college  government,  of  which  the  pro- 
fessor is  but  one  evidence,  and  to  which  my  criticisms  are  in 
greater  measure  directed.  In  the  Atlantic  Monthly  for  April, 
1900,  "One  of  the  Guild,"  from  the  safe  shelter  .of  that  anonymous 
description,  intones  "The  Perplexities  of  a  College  President." 
It  is  probable  that  the  timidity  which,  outside  the  noisy  field  of 
campaign  literature,  is  the  dominant  factor  in  American  letters — 
will  be  effective  to  keep  secret  the  name  of  the  writer  and  the 
colleges  which  he  refers  to.  He  contrasts  the  plenary  authority 
conferred  upon  the  general  manager  of  a  business  enterprise  with 
the  divided  and  enfeebled  authority  conferred  upon  a  college  presi- 
dent— greatly  to  the  disadvantage  of  the  president  and  his  college. 
The  professorial  office  was,  and  too  often  is  yet,  the  means  of 
perching  "high  upon  a  pinnacle,  above  effective  criticism  and  quite 
beyond  the  reach  of  complaint.  *  *  *  A  full  professor  rarely 
died  and  never  resigned.  The  removal  of  the  head  of  a  depart- 
ment for  inefficiency  was  almost  unknown ;  in  fact,  it  may  be  said 
to  have  been  entirely  unknown :"  when  the  professor's  "incompe- 
tency  became  unbearable,"  he  was  not  so  often  removed  as  he  was 
"retired  upon  half  pay."  One  of  the  functions  of  the  up-to-date 
cpllege  president  is  to  get  along  the  best  he  can  in  a  make-shift 
sort  of  way, — "to  do  the  work  of  three  men  because  the  other 
two  are  at  least  not  ready  to  co-operate  with. him,  *  *  * 
to  supplement  the  inefficiency  of  others,  and  to  furnish  enthusiasm 


HERTIG     ON     TAXATION.  4U9 

enough  not  only  to  carry  himself  over  all  obstacles  and  through 
all  difficulties,  but  to  warm  blood  in  the  veins  of  others  whose  tem- 
perature never  yet  rose  above  thirty-four  degrees  Fahrenheit. 
*  *  *  *  It  goes  without  contradiction  that  in  our  colleges 
and  universities  there  is  practically  no  educational  supervision 
whatever.  It  is  doubtful  if  the  bravest  college  president  in  the 
country  would  quite  dare  to  go  into  a  department  and  make  an 
issue  on  the  methods  of  instruction  obtaining  therein ;  and  it  is 
still  more  doubtful  if  he  would  be  sustained  by  his  board  if  he 
did  this.  The  average  board  would  probably  suggest  to  him  that 
he  'would  better  get  at  it  in  some  other  way/ — wisely  neglecting 
to  state  in  what  other  way."  He  quotes  one  toplofty  professor  as 
saying:  "For  the  president  even  to  inquire  as  to  the  methods  of 
my  department  is  to  express  dissatisfaction.  If  he  were  entirely 
satisfied,  he  would  not  inquire.  To  inquire,  therefore,  is  simply 
to  offer  me  an  insult."  And  the  anonymous  president  closes  a 
long  paragraph  with,  "surely,  folly  and  unwisdom  can  go  no  fur- 
ther, but  both  go  to  this  limit  far  too  often  to-day."  He  reports 
"one  of  the  brightest  and  most  promising  of  the  younger  presi- 
dents" as  declining  "a  unanimous  and  pressing  call  to  the  head- 
ship of  one  of  the  most  notable  institutions  in  this  country."  Asked 
why,  the  president  of  such  brightness  and  promise  explained : 
"Because  even  casual  inquiry  showed  that  two  old  and  decadent 
men  controlled  the  board ;  two  old  and  decadent  men,  and  three 
men  weak  in  education  but  strong  in  scheming  and  wire-working, 
controlled  the  faculty ;  and  all  the  old  grannies  in  the  community 
and  in  the  denomination  [note  the  'denomination'],  who  thought 
the  institution  their  private  property,  controlled  both  the  board 
and  the  faculty — and  the  president  was  supposed  to  cut  between 
these  three,  satisfy  all,  and  shift  for  himself." 

Mention  has  been  made  (p.  92,  above)  of  "the  degradation  of 
the  professorial  office"  as  lamented  by  Prof.  Ladd,  of  Yale.  The 
Atlantic  article  just  cited  may  be  looked  upon  as  further  proof 
of  how  easy  it  is  to  impeach  the  professorial  office  by  testimony  . 
from  within.  I  go  no  further  than  to  say  that  where  the  professor 
delivers  himself  on  those  problems,  whose  solution  is  not  to  be 
tested  in  the  laboratory  or  on  the  blackboard, — problems  of  life 
and  mind  that  come  home  to  the  business  and  bosoms  of  men, — 
there  is  a  general  presumption  that  he  is  wrong.  The  historical 
method  is  there  with  his  full  present  approval  to  aid  anyone  who 
cares  to  make  the  census  of  his  hits  and  misses.  That  he  should 
be  wrong  oftener  than  right  is  the  natural  sequence  of  the  condi- 
tions under  which  he  professes,  and  especially  of  the  temperament 
which  prompted  him  in  the  first  instance  to  embrace  them,  or 
which  (making  proper  allowance  for  youth  and  inexperience) 


410  HERTIG    ON     TAXATION. 

suffered  him  later  to  be  content  with  them.  To  strengthen  his 
hand  where  he  is  right,  and  to  promote  conditions  which  tend  to 
make  him  right,  is  one  of  the  new  civil  problems.  The  solution, 
however,  does  not  lie  in  the  direction  pointed  out  in  journalistic 
comment  on  Prof.  Ladd's  lament, — increase  his  dignity  and  influ- 
ence by  paying  larger  salaries  ! 

What  I  have  called  in  this  book  the  New  Jurisprudence  will  be 
in  its  first  stage  the  beginning  of  "law  reform  by  private  enter- 
prise." The  weightiest  of  civil  problems  converge  about  this  sub- 
ject. It  is  the  fashion  to  talk  of  trends  and  tendencies ;  doctrinaire 
reformers  and  grave  professors  alike  regard  them  as  soon  or  not 
quite  so  soon  to  become  crystallized  into  clearly  shaped  result. 
The  men  of  trends  and  tendencies  are  generally  content,  or  rather 
by  personal  limitations  are  forced,  to  be  impotent,  and  generally 
disappointed,  spectators  of  what  a  timid  and  lukewarm,  or  confi- 
dent and  hostile,  bench  and  bar  will  do  with  and  against  the  stream 
of  tendency.  Conditions  in  such  kind  always  present  themselves 
to  me  under  this  general  form :  average  human  nature,  so  placed 
individually  as  to  be  capable  of  forming  an  effective  majority  in 
the  proposed  field  of  operation,  will  make  its  trends  and  tendencies 
effective  only  in  so  far  as  it  finds  in  the  right  man  and  the  right 
men  an  organ  duly  operative  in  every  department  of  civil  govern- 
ment.- For  illustration,  there  is  now  indicated  in  the  United  States 
a  plane  of  cleavage  or  line  of  division  between  the  extremely  rich 
and  those  controlling,  or  directly  benefited  by,  great  collective 
wealth  on  the  one  side,  and  the  remainder  of  the  inhabitants  on  the 
other  side.  There  is  no  present  union  or  harmony  amongst  those 
who  have  the  larger  numerical  end  of  the  division.  Included 
among  them  are  the  very  poor,  whose  cause,  if  espoused  by  the 
very  poor  alone,  would  never  triumph;  the  moderately  poor ;  the 
somewhat  better  off ;  a  great  many  concerns,  or  firms,  that  would 
have  seemed  very  rich  some  years  ago ;  and,  finally,  the  fairly 
wealthy  in  considerable  numbers.  There  is  somewhat  of  common 
aim,  more  of  common  envy,  and  most  of  common  fear.  If  not  the 
very  best  conditions,  they  are  still  conditions  that  promise  material 
for  an  effective  majority,  through  which  the  people  as  a  whole 
may,  and  of  right  ought  to  profit.  But  the  battle  is  not  easy ;  and 
the  right  jurisprudence,  if  not  quite  indispensable  to  the  winning, 
must  certainly  be  found  for  fostering  and  retaining  the  right 
fruitage  of  victory. 

The  law  as  apprehended  from  its  routine  and  technical  side 
is  necessarily  a  halting,  often  a  despairing,  leader.  Along  its  blind 
side  operates  the  great  fact  that  tremendous  law-making  is  often 
the  immediate  fruit  of  the  law's  paralysis — makes  great  leaps 
which  the  law  shall  afterwards  bridge  with  feeble  metaphysical 


HERTIG    ON    TAXATION.  411 

strands.  Conscious  deliberation,  constitutional  conventions,  re- 
ports of  conference  committees  and  the  like — may  find  the  work 
which  they  failed  to  do  supplemented  in  a  startling  way.  I  would 
have  the  New  Jurisprudence  forestall  the  dramatic  effect  of  such 
supplements  by  obviating  their  necessity.  In  short,  the  making, 
amending  and  enforcing  of  constitutions  and  laws  that  shall  fill  the 
needs  of  the  people  must  be  the  ideal  and  the  only  ideal  of  the 
New  Jurisprudence. 

The  people,  it  must  not  be  forgotten,  are  often  influenced  by 
the  names,  but  care  little  for  the  forms  of  things,  if  such  forms  in 
fact  or  deceptive  seeming  are  the  means  of  their  gaining  a  sub- 
stantial advantage.  Immediate  history  furnishes  striking  proof. 
If  Theodore  Roosevelt,  reviving  Jackson's  dictum  that  the  execu- 
tive in  swearing  to  support  the  Constitution  swears  to  support  it  as 
he  understands  it ;  and  if  Roosevelt,  in  the  name  of  the  Constitu- 
tion, in  the  name  of  the  maxim  that  "the  safety  of  the  people  is 
the  supreme  law,"  and  in  the  name  of  Lincoln  and  precedents  by 
him,  and  even  by  Grover  Cleveland  furnished — were  to  cast 
about  for  summary  means  of  ending  in  the  workingman's  favor 
the  anthracite  coal  strike,  there  would  be  only  a  matter  of  easily 
crossed  form  between  him  and  the  putting  into  force  of  summary 
measures  backed  by  the  military  arm  of  the  government.  Who 
doubts  that  the  people  would  applaud  ?  Who  believes  that  Con- 
gress would  impeach?  Yet  who  is  not  sure  that  among  those 
who  would  applaud  are  many  having  no  active  sympathy  for  the 
striking  workman  ?  And  who  does  not  see  that  each  day's  con- 
tinuance of  the  strike  furnishes  new  and  stronger  evidence  that 
the  people  are  getting  ready  to  accept  undisguised  paternalism? 

We  come  soon  to  the  question  of  ways  and  means,  of  terms 
and  conditions,  for  the  acquiring  by  the  people  of  such  carrying 
systems  and  other  properties  as  they  need  in  their  sovereign  and 
collective  capacity.  The  people  need  the  right  specialized  organ 
for  negotiating  the  surrender  to  them  of  such  property ;  and  in 
the  case  of  the  purchase  of  the  same  or  of  some  of  them  by  pol- 
itician's bad  bargain  before  the  creation  of  such  organ,  they  need 
the  right  voice  to  proclaim  their  notice  of  Us  pende'ns,  so  to 
speak,  affecting  with  intention  to  tax  specially  or  to  convert  into 
annuities  for  a  term  of  years,  the  principal  or  the  interest  of  such 
securities,  or  such  portion  thereof,  as  the  government  shall  have 
foolishly  and  prodigally  expended  in  such  purchase.  The  people 
shall  never  be  estopped  from  amending  or  undoing  a  foolish  or 
corrupt  bargain  to  which  their  government  shall  have  been  a  par- 
ty. The  expediency  of  undoing  in  a  given  case  shall  be  open  to 
question,  the  right  of  it,  never. 

Just  as  much  as  the  people  in  their  collective  capacity,  the 


412  HERTIG    ON    TAXATION. 

individual  in  his  personal  capacity  needs  the  right  organ  (or  rep- 
resentation), the  right  safeguards,  the  right  guaranties.  I  see  no 
insoluble  difficulty  in  constructing  a  paternal  system  which  shall 
leave  it  in  the  power  of  the  individual  to  be  less  concerned  about, 
and  less  subject  to,  his  fellows  than  he  is  in  current  states  of  so- 
ciety. My  paternalism  is  to  be  the  synthesis  of  governmental 
and  individual  right  and  function,  but  without  merger.  The 
Civil  Nation  will  need  all  sorts  of  activities,  and  will  certainly 
need  and  have  room  for  all  sorts  of  sturdy  individualities  not 
hitherto  with  tolerable  uniformity  pronounced  criminal.  Here, 
as  in  the  last  preceding  paragraph  have  been  indicated  phases  in 
which  the  New  Jurisprudence  shall  be  specially  diligent. 

Each  the  part  of  this  appendix  relating  to  professorial  work 
and  the  part  of  graver  import  following  thereupon  have  been 
written  with  direct  reference  to  making  an  avowed  beginning  of 
needed  practical  work  in  the  directions  indicated.  Thus  we  need 
in  our  universities  the  right  professors  of  applied  economics  and 
applied  jurisprudence.  I  would  neither  damn  with  faint  praise 
nor  yet  curse  with  sweeping  censure ;  but  between  the  two  I  may 
say  that  one  man  should  fill  the  chair  for  both  of  these  sciences, 
and  that  such  chair  is  everywhere  vacant.  I  believe,  however, 
that  the  right  man  and  the  right  men  can  be  developed,  and  to 
such  end  seek  to  direct  every  line  in  the  foregoing  pages  that 
has  remote  or  immediate  reference  to  professors. 

I  would  found  the  National  Civil  Society,  and  without  such 
end  had  not  written  this  book,  nor  the  one  (now  nearly  done) 
entitled  Anarchism  and  Counter- Anarchism,  nor  undertaken  my 
magnum  opus  (now  well  under  way),  The  Constitution  of  the 
United  States.  The  Civil  Society  is  intended  to  perform  the 
functions,  as  near  as  may  be,  of  a  voluntary  state,  with  the  frank- 
est and  fullest  allegiance  to  the  established  agencies  of  govern- 
ment, and  with  just  as  frank  and  just  as  full  a  determination  to 
amend  and  modify  those  agencies  in  the  direction  of  its  own  pro- 
gram of  government  by  all  constitutional  and  lawful  means. 
Against  the  time  when  the  inevitable  busybody  shall  hint  of  es- 
oteric doctrine  and  esoteric  purpose,  I  will  say  now  that  there 
will  be  neither  esoteric  doctrine  nor  esoteric  purpose.  The  presi- 
dent and  founder  of  this  society  will  naturally  fix  the  terms  of 
membership  therein.  To  further  unity  of  program  and  concen- 
tration of  effort,  and  especially  to  develop  the  right  successor, 
each  president  will  retain  his  office  for  a  considerable  period. 

The  Civil  Publishing  'Company,  about  to  be  incorporated,  will 
soon  publish  The  Civilian, — a  monthly  serial  at  50  cents  per  an- 
num. The  critical  and  constructive  work  required  by  what  may 


HERTIG    ON    TAXATION.  418 

now  be  called  the  Civil  Plan  will  find  expounding  voice  in  its 
pages. 

This,  my  book  on  Taxation,  for  which  advance  orders  have 
been  taken  at  $1.00  per  copy,  will  hereafter  be  sold  at  $1.50  per 
copy,  as  the  work  is  much  larger  than  it  was  at  first  expected  to 
be.  Advance  orders  will,  of  course,  be  filled  at  the  price  first 
named.  Orders  for  the  book  and  subscriptions  to  the  Civilian 
may  be  sent  to  me,  at  615  I2th  Ave.  S.  E.,  Minneapolis.  I  shall 
be  pleased  to  hear  from  such  persons  as  may  be  interested  in  the 
work  planned  for  the  National  Civil  Society. 

C.  M.  HERTIG. 


INDEX. 


[The  heads,  or  summaries,  of  chapters,  will  be  found  only  in  the  body 
of  the  work,  each  at  the  beginning  of  its  chapter.  The  chapters  (I-XX 
inclusive)  begin  respectively  on  the  following  numbered  pages :  13,  38, 
46,  49,  63,  77,  84,  100,  107,  126,  138,  162,  169,  183,  209,  246,  282,  330, 
367,  384-] 


Absolutism,  caution  against,  14,  16; 
Prof.  Adams  furnishes  case  of,  91. 

Acquiescence,  passive,  usual  state  of 
mind  with  the  governed  for  the 
governors,  27;  to  create  -and  keep 
happy  medium  in,  the  routine 
game  of  practical  politics,  27;  to 
do  and  get  doing  acquiesced  in 
the  sum  and  substance  of  govern- 
ment, 72. 

Adams,  Prof.  Henry  Carter,  as  ev- 
idencing drift  toward  paternalism, 
47;  condemns  benefit  and  pur- 
chase theories  of  taxation,  47;  edi- 
fying a  rebours  on  fees,  91;  makes 
a  prize  sophism,  91-92;  professori- 
al decadence  in  re,  92. 

Alabama,  constitution  of  1819  on 
proportional  taxation,  51. 

American,  average,  best  fellow  in 
the  world,  but  cares  little  for  lives 
of  black  or  brown,  33;  specific  in- 
stance of  his  feeling  in  this  be- 
half, 33-4;  cheerful  over  the  mani- 
fest destiny  of  which  he  is  instru- 
ment, 33. 

American  language,  resources  of  for 
translation  dissolve  Stein's  ambi- 
guity, 391. 

Anarchism,  Huxley  on  individualism 
as  leading  to,  66;  those  who  sigh 
after  the  ideals  of,  66. 

"Anarchism  and  Counter-Anarch- 
ism," Hertig's  forthcoming  book 
on,  19. 

Anarchists,  relation  between  and 
abuses  of  taxation,  19. 

Anarchy,  free  silver  as  alleged  stalk- 
ing-horse for,  32;  the,  of  confusion 
and  disorder  in  tax  reform  move- 
ments and  tax  laws,  164. 

Appendix  A.,  notes  discrepancy  in 
statistics,  censures  dictionary- 


makers  and  praises  dictionary 
poets,  404-407. 

Appendix  B.,  on  professorial  limi- 
tations as  seen  from  within; 
when  presumption  applies  that 
professors  are  oftener  wrong  than 
right;  on  new  jurisprudence,  na- 
tional civil  society,  and  the  Civil- 
ian (periodical)  in  aid  of  the 
"Civil  Plan,"  pp.  408-413- 

Assessment,  values  as  per,  see  As- 
sessor; total  of  in  Minnesota  from 
1860  to  1901,  114-116;  of  certain 
counties,  and  the  rates  in,  116-125. 

Assessor,  guesses  modestly  in  Amer- 
ica, 114;  his  values  compared  with 
the  selling  prices  of  real  estate 
in  Iowa,  Wisconsin,  Minnesota, 
Pennsyvlania,  and  Indiana,  171- 
181;  work  of  under  proposed  tax 
code,  195-199;  proposed  fines  for, 
197;  returns  to  county  auditor, 
198-199;  warned  against  "anarchy," 
199;  oath  of  to  his  returns,  199; 
may  not  in  Wisconsin  recant  what 
he  has  sworn  to,  200;  oath  and 
bond  of,  200;  values  Red  River 
Valley  lands  at  20  per  cent,  of 
their  worth,  213. 

Atlantic  Monthly,  sad  and  serious 
editor  of  in  the  limitations  of  his 
virtue,  151. 

Audacity,  author's  (preface),  VIII. 

Auditor,  county,  hard-worked  under 
proposed  code,  198-199,  201,  203, 

233- 

Augustus,  Caesar,  bolder  in  de- 
bauchery than  moderns,  146. 

Autocrat,  do  we  need?  168. 

Bagehot,  Walter,  on  "primitive  no- 
tion of  taxation,"  17-18:  caught  by 
showiness  of  Second  Empire,  28 
(note). 


416 


HAVE     YOU     READ     APPENDIX     B? 


Bankers,  alarmed  by  proposed  code 
of  Minnesota  tax  commission,  209- 
212;  impressed  by  Grover  Cleve- 
land's blatherskite  comptroller  of 
the  currency,  210;  got  satisfactory 
amendment  to  the  proposed  code, 
210;  pay  a  high,  but  still  a  compro- 
mise, tax,  21 1 ;  how  their  shares 
are  assessed,  211;  arguments  of 
•  various,  212-213;  how  their  high 
tax  on  nominal  capital  becomes  a 
moderate  income  tax,  269. 

Bismarck,  on  state  as  paternal  agen- 
cy, 29. 

Black,  Jeremiah  S.,  judicial  utter- 
ance on  taxation  as  plunder,  17. 

California,  her  constitution  of  1849 
and  that  of  1897  provide  for  pro- 
portional taxation,  51. 

Caligula,  mentioned,  146,  147,  148. 

Century  Dictionary.  (See  "Diction- 
ary.") 

Civil  Nation,  reference  to  a  new, 
(preface)  xi,  58,  75;  relation  of  to 
New  Jurisprudence,  58,  62;  organ 
of  right  social  consciousness,  361. 
(See  New  Jurisprudence.) 

Civil  War,  cost  $9,000,000,000,  30; 
simplicity  of  slavery  issue  therein, 
30. 

Classification,  primary  of  public  rev- 
enues, (preface)  viii;  disputatious 
domain  of  (preface)  ix. 

Cleveland,  Grover,  as  inconsistent 
individualist  in  re  oleomargarine 
tax  of  1886,  25-6  (note)  •  as  ox- 
head  leader,  35-6;  trusts  not 
averse  to,  36. 

Collectivism,  enforced  and  universal, 
an  idle  dream,  75. 

Colonial  problems,  author's  position 
on,  32-4. 

Congress  of  U.  S.,  first  taxes  im- 
posed by,  19-20;  may  tax  for  re- 
form under  revenue  guise,  22-5; 
Philadelphia  of  1744,  called  "zeal- 
ots of  anarchy"  by  Dr.  Johnson, 
41;  of  U.  S.  in  1901-2  wrestles  with 
bills  to  supress  anarchy,  41. 

Conscience,  collective  oi  effective 
majority,  is,  in  final  analysis,  the 
only  check  on  destructive  or  con- 
fiscatory  taxation,  26. 

Constitution  of  U  .S.,  limitations  of 
as  to  taxation  not  quantitative, 
26;  Hertig  on,  mention  (preface) 


xi,  32;  Fourteenth  Amendment  to, 
restrains  little  on  tax  matters,  59, 
60;  Madison  on,  67;  may  be  made 
retrospective  by  amendment,  80-1; 
draws  hard  and  fast  line  only  in 
formal  and  comparatively  unim- 
portant matters,  81-2;  allegations 
of  how  affected  by  judge-made 
law,  287;  its  limitations  distin- 
guished from  those  of  state  con- 
stitutions, 291;  its  technical  limita- 
tions of  the  taxing  powers  of  the 
states,  291-298;  of  the  taxing  pow- 
ers of  congress,  298-301;  unit  rule 
does  not  violate,  301-302. 

Constitutions,  state  and  national,  no 
effective  check  on  power  of  taxa- 
tion, 59-6i;  various  state  cited,  51; 
flexibility  of  written,  81-3. 

Cooley,  Judge  Thomas  M.,  tax  def- 
initions of  cited  and  criticised,  49- 
54;  as  a  jurist  must  compromise 
with  his  individualism,  69;  moved 
by  Louisiana  lottery  to  favor  ex- 
treme paternal  measure  on  part  of 
federal  government,  71;  comment 
on  his  opinion  in  People  v  Town- 
ship, 72-6. 

Corporations,  (see  "public  service 
companies,"  also,  "steel  trust," 
etc.);  "tail-twisting"  of,  contrast- 
ed with  head-twisting,  269;  the 
unit  rule  and  in  Chicago,  301-302, 
380-383;  tail-twisting  of  per  unit 
rule  or  otherwise,  poor  statesman- 
ship, 385-386. 

Counties,  finances  and  valuations  of 
certain  in  Minnesota,  116-125; 
true  relation  of  personal  to  real 
property  in  an  old  and  typical  ru- 
ral county  (Greene  Co.,  Pa.),  119; 
financing  of  new,  123;  low  rate  of 
taxation  does  not  necessarily 
prove  better  management,  124; 
the  three  urban  of  Minnesota  as 
tax-payers,  124-125. 

"Credit,"  a,  is  valued  comparatively 
higher  than  other  property  by  as- 
sessors, if  assessed  at  all,  184; 
compared  with  "faith,"  as  the  lat- 
ter is  defined  by  St.  Paul,  184- 
185;  what  is  a,  190-191;  illustrates 
breakdown  of  general  property 
tax,  367-368. 

Cummins,  A.  B.,  governor  of  Iowa, 
has  trouble  with  minority  ap- 


INDEX. 


417 


pointments    for      Democrats,    243, 

Dakota,  county,  town  and  school 
warrants  in,  121-123;  futile  grain 
taxing  in  north,  192-193. 

Data  and  facts,  highly  necessary, 
but  it  is  not  every  judgment  that 
they  enlighten,  15-16. 

Definition,  all  is  dangerous,  39,  53 
(note) ;  of  taxes  and  the  right  to 
tax,  39-43,  44-5;  of  Dr.  Johnson  as 
rewritten  by  the  author,  42-3;  tax 
definitions  from  French  sources, 
43~5;  he  who  frames  should  recall 
what  he  knows,  54  (note),  70. 

Democratic  party,  Oxhead  leader- 
ship of,.  34-7,  recruiting  ground  for 
man  witli  right  sort  of  issues,  37; 
as  a  "nearly  solid  minority,"  in 
Wisconsin  takes  the  railroad  side 
of  tax  fight,  88;  in  Minnesota, 
conservative  on  taxation,  233;  did 
not  vote  solid  on  Minnesota  tax 
measures,  233;  a  dissolving  quan- 
tity in  Iowa,  243. 

Denslow,  Van  Buren,  cited  apropos 
English  tobacco  tax,  21;  comment 
by  on  Munn  v.  Illinois,  68;  on 
incidence  of  taxes,  388;  not  men- 
tioned by  professors,  perhaps  be- 
cause he  mopped  floor  with  their 
.free-trade  wing,  388. 

Dictionary,  French  Academy's  def- 
inition of  tax,  43;  Littre's,  44; 
Century's  quoted  and  criticised, 
53-7;  divers  laxities  and  inaccura- 
cies of  the  Century,  54-57,  appen- 
dix A;  of  tax  commission's  as  to 
personalty  discussed,  188-190. 

Domain,  of  U.  S.  and  compulsory 
revenue  (preface),  viii-ix;  of  U. 
S.  and  of  states  presents  interest- 
ing questions,  95.  (See  eminent 
domain.) 

Double  taxation,  as  proposed  by 
tax  commission,  189;  Massachus- 
etts practices  it,  189. 

Dunn,  Robert  C,  State  auditor  of 
Minnesota,  55;  efficient  officer,  246; 
and  Jacobson,  sturdy  characters, 
260-261;  remarks  of  on  Jacobson 
bill,  263-265'.  (See  Jacobson.) 

Effective  majority,  distinction  be- 
tween and  numerical  majority, 
26-7;  may  coincide  at  times  with 
numerical  majority,  27;  generally 
meets  with  passive  acquiescence 


from  the  numerical  majority,  27; 
is  supreme  power  of  every  com- 
munity, 42;  shifted  by  successful 
revolution,  43;  collective  consci- 
ence of  much  the  same  as  Aus- 
tin's "positive  morality,"  80;  de- 
termines and  enforces  constitu- 
tional limitations,  85. 

Elevators  should  pay  moderate 
franchise  tax  according  to  cap- 
acity, but  none  on  grain,  193-4; 
how  wheat  was  assessed  at 
seven  cents  per  bushel,  194. 

Eminent  Domain,  nature  and  im- 
portance of  (preface),  ix-x. 

Etymology",  Seligman's  attempt  to 
show  evolution  of  tax  by,  14-15 
(note). 

Exemption,  of  personal  property 
from  taxation,  213-216. 

Farmers,  position  and  petition  of,  in 
reference  to  tax  commissions' 
code,  222-225;  a  natural  stump 
speaker  of  them  favors  drastic  tax 
code,  225;  pay  a  gross  income  tax 
in  Wisconsin  of  4.2  per  cent.,  373; 
or  13  per  cent,  of  net  income, 
373;  facts  for  them  to  remember 
in  the  incidence  of  taxation,  400- 
402. 

Fees,  as  a  branch  of  public  revenue 
(preface),  ix-x;  Wagner  devotes 
166  pages  to,  ix-x;  relatively  un- 
important in  United  States,  90; 
pay  expense  of  maintaining  courts 
in  Bavaria,  90;  individualist  con- 
ception of  with  English  and 
American  judges,  90;  in  justice 
courts  quantitative,  92;  may  be 
really  or  spuriously  quantitative, 
92;  reference  to  abuse  of  denounc- 
ed by  Bentham,  299. 

France,  tobacco  monopoly  in,  95-7; 
per  capita  taxation  in,  98. 

Gilder,  Richard  Watson,  American 
poet,  144  (note) ;  muses  always 
hearken  to  him,  386;  dictionary  la- 
bors and  soulful  sonnets  of,  Ap- 
pendix A.,  403-406. 

Goethe,  quoted  « on  laws  and  rights 
as  inherited  disease,  21. 

Government  potent  factor  in,  is 
what  men  believe,  99. 

Grain,  awkwardness  of  taxing,  191- 
4;  taxing  possessor  of  (North  Da- 
kota case)  in  lieu  of  owner,  192-3; 


418 


HAVE     YOU     READ     APPENDIX     B? 


in  elevators  should  not  be  taxed 
but  moderate  franchise  tax  should 
be  imposed  according  to  elevator 
capacity,  193-194;  arguments  on 
the  taxing  of,  219-221;  anticipated 
results  of  attempting  to  tax  at  full 
value,  219-220;  author  argues  that 
grain  should  not  be  taxed  at  all, 
220-22 1. 

Great  issues,  an  embarrassment  to 
bankrupt  statesmanship  27,  29,  30- 

Great  Northern  Railroad,  hung  up 
on  the  way  to  Puget  Sound,  101 ; 
helped  to  completion  by  selling 
bonds  at  72^/2  cents  on  the  dollar, 
101 ;  is  a  corporation  created  by 
the  Territory  of  Minnesota,  in 
1856,  108;  original  charter  name 
was  Minneapolis  and  St.  Cloud 
Railway  Company,  108;  began  with 
the  ''Manitoba"  system  in  1879,  °f 
which  it  became  the  lessee  in  1890, 
and  of  which  it  owns  all  the  stock, 
126,  128,  131;  financial  operations 
of,  128-137;  has  yielded  in  extra 
profits  more  than  $200,000,000,  134- 
136. 

Grimshaw,  William  H.,  discusses  and 
condemns  single  tax,  351-358. 

Gross  earnings  tax,  in  Minnesota, 
107-11 1;  in  Wisconsin,  113;  a  dis- 
creetly graded  for  public-service 
companies,  269;  a  just  tax,  if  so 
graded,  326;  in  relation  to  Jacob- 
son  act,  112,  328-329. 

Hawthorne,  Nathaniel,  the  problem 
of  Nero's  character,  140. 

Hennepin,  Father,  calls  buffalo  the 
"wild  ox,"  100. 

Herbert,  Auberon,  on  state-given 
education  from  stand-point  of  in- 
dividualism, 63-5. 

Hill,  James  J.,  splendid  brigand, 
ioi ;  had  close  squeeze  to  finish  the 
Great  Northern  Railway,  101-102; 
he  and  his  friends  got  predecessor 
of  Great  Northern  in  1879,  127; 
has  certain  qualities  of  Napoleon, 
138;  of  excellent  natural  character, 
r 38-139;  has  clean  legal  title  to 
fruits  of  his  brigandage,  157; 
weakness  for  diamonds,  158. 

Hobbs,  meaning  of  his  proposition, 
"no  law  can  be  unjust,"  43. 


Illinois,  reference  to  constitutions  of, 

51- 

Incidence,  of  discount  on  county 
-warrants,  121-122;  of  taxation, 
wide  variance  concerning,  215;  of 
consumption  tax  on  laborers,  215; 
of  taxes  generally,  386-402. 

Individualism,  current  and  mixed  in 
bad  case,  58,  63,  65-6;  general  cur- 
rent of  American  jurisprudence 
sets  away  from,  66-8;  a  proposition 
of  that  makes  for  paternalism,  76. 

Individualists,  must  choose  between 
author's  paternalism  and  worse, 
58;  one  of  the  genuine  on  state- 
given  education,  64-5;  all  make 
grudging  concessions  to  govern- 
ment, 77. 

Income  tax,  all  collectible  and  non- 
confiscatory taxes  are  income 
taxes  in  substance,  even  when  not 
so  in  form,  269;  and  the  proposed 
amendment  of  Minnesota  consti- 
tution, 324-328;  Wisconsin  farmers 
pay  a  gross  of  4.2  per  cent.,  373; 
principle  of  must  be  applied  to 
credits,  if  the  latter  are  taxed  at 
all,  374-3/5;  caution  against  over- 
sanguine  expectation  from,  375; 
more  suitable  for  federal  govern- 
ment, 375-376;  yield  of  civil  war 
income  tax,  376;  exemptions  and 
collections  under  it,  376-377;  art 
of  collecting  and  amendment  to 
constitution  of  U.  S.,  377-8;  origin 
and  workings  of  in  Great  Britain, 
379-380;  unit  rule  violates  princi- 
ple of,  380-383;  taxes,  in  general, 
should  fall  on,  384-385. 

Iron  mines,  proposed  taxation  of 
and  the  steel  trust,  258-266;  assess- 
ed value  of  raised  from  $13,000,- 
oco  to  $30,000,000,  265;  independ- 
ent ones,  under  present  condi- 
tions, a  fiction,  267-8. 

Issues,  great,  relation  of  to  bank- 
rupt statesmanship,  27,  29;  dis- 
tinction between  issues  great  in 
themselves  and  issues  great  in 
quantitative  results,  30-1;  issues 
struggling  toward  greatness  but 
masked  by  simple  slogan,  31;  is- 
sue of  1896  so  masked,  31. 

Italy,  taxation  as  robbery  in,  18-19; 
taxation  as  cause  of  anarchism  in, 
19;  justice  a  myth  in,  19. 


INDEX. 


419 


Jacobson,  J.  F.,  questions  on  gross 
earning  bill  of,  112-113,  328-329; 
offers  and  gets  accepted  a  delu- 
sive amendment,  235-238;  1902 
tax-bill  of,  257-281;  tried  his 
"damnedest,"  261;  as  controversial- 
ist, debater  and  sturdy  character, 
223-224,  238,  260-261. 

Japan,  collossal  folly  of  in  aping  for- 
eign ways,  32. 

Johnson,  Dr.  Samuel,  on  the  right 
to  tax  the  American  colonies,  40; 
describes  right  to  tax  and  defines 
tax,  40-1;  calls  American  con- 
gress "zealots  of  anarchy"  and 
"impudent  congress  of  anarchy," 
41 ;  according  to,  no  tax  law  un- 
just, 43. 

Judges,  sophism  of  to  uphold  taxes 
as  proportional,  59;  do  not  often 
nor  very  well  discuss  ultimates  of 
government  and  of  jurisprudence, 
78. 

Justice,  legal  and  ethical  sometimes 
distinct,  82. 

Labor,  representatives  of  organized, 
argue  for  tax  exemptions,  213; 
and  against  property  tax  on  ships, 
grain  and  bank  deposits,  215. 

La  Follette,  Robt.  M.,  as  Republic- 
an leader  in  Wisconsin  for  tax  and 
election  reforms,  87;  elected  gov- 
ernor in  1900,  in  spite  of  opposi- 
tion of  machine  Republicans,  87; 
insists  that  platform  pledges  must 
be  kept,  88;  signals  corrupt  use 
of  wealth  as  greatest  danger  men- 
acing Republican  institutions,  89; 
asks  if  American  people  shall  be- 
come masters  or  victims  of  col- 
lossal wealth,  89;  author  draws 
from  his  words  a  conclusion  which 
La  Follette  would  hardly  sanction, 
89. 

Law,  and  its  heirlooms,  an  eternal 
hereditary  disease,  21;  law,  no 
positive  is  legally  unjust,  43;  no 
tax  law  is  unjust  from  Johnson's 
standpoint,  43;  interposes  practi- 
cally no  barrier  between  wealth 
and  confiscatory  taxation,  61:  of 
federal  constitution  as  bearing  on 
taxing  powers,  291-302;  causes  and 
conflicts  of  judge-made,  285-291, 
302-303. 

Lecky,  W.  E.  H.,  on  the  regime  of 


Napoleon  III.,  28,  (note);  his 
Democracy  and  Liberty  a  pessi- 
mistic book,  61 ;  sees  serious 
clouds  on  our  horizon,  61;  his  ex- 
aggerated estimate  of  constitu- 
tional limitations  on  taxation,  61. 

Legal  profession,  positive  morality 
of  as  proximately  determining 
factor  in  American  constitutional 
law,  82;  nature  of  its  positive 
morality,  82. 

Legislature  of  Minnesota,  (see  ''Per- 
sonal Mention");  authorizes  ap- 
pointment and  fixes  duties  of  tax 
commission,  162;  meets  in'  special 
session,  163;  general  capacity  and 
good  intent  of,  164-167;  the  diffi- 
culties facing  it,  167;  public  hear- 
ings before  tax  committees  of, 
209-231,  263-275;  popular  branch  of 
takes  up  and  kills  proposed  tax 
code,  231-245;  analysis  of  tax 
measures  passed  by  in  extra  ses- 
sion, 246-257;  how  representatives 
passed  and  senate  killed  Jacob- 
son's  tonnage  and  franchise  tax 
bill,  257-281;  its  projected  consti- 
tutional amendments,  283-284,  303- 
328. 

Leopardi,    Giacomo,    quoted,    105. 

License  fees,  when  imposed  for  rev- 
enue are  imposed  in  the  exercise 
of  taxing  power,  52. 

Limitations,  of  taxing  and  other 
powers,  rest  in  collective  consci- 
ence, 26;  implied  or  expressed  in 
all  grants  and  constitutions,  77; 
assassination  as,  78;  positive  mo- 
rality the  sole  sanction  and  guar- 
antor of  constitutional,  79;  of  fed- 
eral and  state  constitutions  in  par- 
ticular cases,  285-302. 

Liquor,  naive  theory  of  constitution- 
al liberty  formerly  held  by  vendors 
of,  69. 

Live  stock,  breeders  of,  oppose  high 
assessments  on,  222. 

"Loading,"  as  a  means  of  taking 
profits  and  of  concealing  railroad 
earnings,  131. 

Machiavelli,  quoted  in  re  princelings 
of  Romagna,  16;  Napoleon  did  not 
need  advice  of  in  reference  to 
amours,  146. 

Maine,  Sir  H.  Sumner,  on  taxation 
by  Indian  kings,  17;  on  distinction 


420 


HAVE     YOU     READ     APPENDIX     B? 


between  power  to  tax  and  power 
to  exact  rent,   17. 

Majority,  nominal  or  numerical,  dis- 
tinguished from  effective,  26-27; 
see  "effective  majority." 

"Manitoba"  Company,  the,  popular 
name  for  St.  Paul,  M.  &  M.  Rail- 
way Company,  126;  profitable  from 
the  outset,  126-128;  its  cash,  stock 
and  bond  dividends,  127-128;  leas- 
ed to  Great  Northern  Railway 
Company  for  999  years,  128;  its 
capital  stock  of  $20,000,000  after- 
wards bought  by  Great  Northern 
for  $25,000,000  of  *  the  latter's 
stock,  131-132. 

Marshall,  Chief  Justice,  power  to  tax 
power  to  destroy,  298;  on  effect  of 
state  power  to  tax  federal  instru- 
mentalities, 299. 

Massachusetts,  reference  to  consti- 
tution of,  51;  goes  far  in  limiting 
individual  right,  51;  taxes  property 
of. t side  her  boundaries,  189. 
'Medium,  abstract  theory  must  face 
a  resisting,  153. 

Michigan,  supreme  court  of  holds 
rtate  may  still  tax  dram  shops, 
though  constitution  forbids  the  li- 
censing thereof,  59  (note). 

Minnesota,  population  and  growth 
of  compared  with  other  states,  100- 
104;  buffalo  meat  served  by  hotels 
of  in  1880,  100;  prairie  chickens 
near  leading  cities  of  in  1890,  101; 
fertility  and  commerce  of  sup- 
ported the  unfinished  Great  North- 
ern railroad,  101;  her  showing 
with  other  states  in  1900,  102- 
104;  area  of  compared  with  that 
of  some  other  states,  103-104;  may 
support  population  of  many  milli- 
ons, 103-104;  her  tax  problems  in 
close  relation  to  those  of  other 
states,  104-105;  once  the  physical 
backbone  of  this  continent,  105; 
should  not  in  exulting  over 
growth  forget  growth's  problems, 
105-106;  her  gross  earnings  tax  on 
railroads,  and  its  yield,  107-113; 
owns  bonds,  land  contracts  and 
lands  to  aggregate  of  $20,000,000 
in  value,  116;  her  assessed  valua- 
tions and  rates  of  taxes  for  certain 
years,  114-116;  her  counties  from 
a  tax-paying  standpoint,  116-118, 


119-120,  124-125;  legislature  in 
1901  authorizes  appointment  of 
tax  commission,  162;  governor 
calls  special  session  for  February 
4th,  1902,  163;  constitution  partly 
copied  from  Ohio's,  183;  and 
prescribes  "true  value  in  money" 
for  assessed  value,  183;  practice 
and  custom  nullify  the  letter  of 
her  constitution  as  regards  assess- 
ments, 184-188;  tax  work  erf  her 
legislature  in  1902  (see  legisla- 
ture); her  constitution  difficult  to 
amend,  282-285;  struggle  in  pro- 
posing amendments,  283-285,  303- 
324;  proposed  amendments  to 
constitution  set  forth  and  anal- 
yzed, 303-3M.  317-328. 

Missouri,  reference  to  constitution 
of,  51-52. 

Moliere,  reference  to  his  M.  Jour- 
dain,  20. 

Money,  what  is  in  tax-law,  190,  236; 
a  bank  credit  is,  190,  236. 

Monopoly,  Proudhon's  notion  of 
taxes  as  protecting,  44;  modern 
tax  legislation  as  strengthening, 
and  so  giving  unconscious  aid  to 
paternalism,  328. 

Morality,  positive,  as  arbiter  of  sov- 
ereign and  constitutional  limita- 
tions, 79-83;  of  legal  profession, 
82-83- 

Montesquieu,  in  favor  with  the 
framers  of  our  constitution,  44; 
his  definition  of  public  revenues, 

44- 

Napoleon,  established  tobacco  mo- 
nopoly in  France,  95;  his  "sweet" 
way  with  plutocrats,  96  (note.);  as 
achieving  the  purple  with  charac- 
ter formed  and  remaininpf  consis- 
tent, 141;  contrasted  with  Marcus 
Aurelius,  141 ;  his  pessimistic  views 
of  human  nature,  141-142,  145; 
liked  willing  rather  than  brainy 
men,  143;  despised  social  conven- 
tions, 144-145;  even  as  consul  was 
sole  ruler,  143-144;  Hugo's  lines 
on  the  emperor  in  the  consul,  144; 
the  kernel  of  truth  in  his  cynical 
view  of  conventions,  145;  blind 
side  of  his  character,  145;  was  still 
the  child  of  his  time  and  to  some 
extent  of  its  limitations,  146-147; 
his  narrow  view  of  individual 


INDEX. 


right,  146-147;  colossal  imagina- 
tion of  and  the  wild  dreams  of 
the  Roman  empeiors,  147. 

Napoleon  III.,  as  furnishing  exam- 
ple of  bankrupt  statesmanship,  27- 
29;  flourishing  trumpets  to  dis- 
tract attention,  28;  regime  of  fee- 
ble, despotic  and  lavish  of  public 
moneys,  28;  Bismarck's  deeper 
grasp  in  contrast  with,  29;  his 
government  a  type  of  parasitic  pa- 
ternalism, 28  (note). 

Nelson,  Knute,  U.  S.  senator,  com- 
pares victory  of  1896,  with  trium- 
phant result  of  the  civil  war,  31. 

Nero,  problem  of  his  character  from 
artist's  standpoint,  139-140,  148;  as 
seen  from  without,  148;  as  tax-re- 
former, 149;  splendidly  lavish,  156. 

New  England  could  shout  itself 
hoarse  on  chattel  slavery,  pipes 
thin  on  industrial  slavery,  30;  can- 
not furnish  the  code  nor  the  know- 
ledge of  human  nature  to  hunt 
down  industrial  slavery,  30. 

New  Jurisprudence  authoritative 
voice  of  civil  nation,  58,  62;  rigor 
of  in  forfeiting  charters,  160;  but 
will  not  forget  limitations  of 
equity,  161 ;  to  furnish  civil  na- 
tion with  right  conception  of  jus- 
tice, 289;  problems  for,  386. 

Oath,  listing  under,  not  obligatory 
in  Minnesota,  114;  number  and 
rigor  of  oaths  proposed  by  the 
tax  commission,  195-199;  wheth- 
er cross-examination  of  tax-dodg- 
er under  should  be  imperative,  196- 
197;  code  impeaches  efficacy  of, 
199-200,  203;  a  merciful  one,  199; 
assessor  in  Wisconsin  may  not 
contradict  his,  200;  foolish  multi- 
plication of,  200-201;  counts  for  lit- 
tle in  tax-matters,  201;  perjury  by 
means  of  an  easy  step  beyond 
plain  lying,  222. 

Ohio,  constitution  of  condemns  poll- 
taxes,  50;  uniformity  clause  of 
copied  in  Minnesota,  183;  in  North 
Dakota.  193;  her  tax  commission's 
report  cited,  372-373- 

Oleomargarine,  tax  on  to  protect 
butter,  23-26. 

Optimism,  a  shallow,  the  painted 
idol  of  timid  and  servile  minds,  53; 

Paternalism,    author    frankly    favors, 


58;  how  genuine  individualism 
feels  when  face  to  face  with,  64-65; 
evidence  of  in  constitutional  inter- 
pretation, 66-68;  not  necessarily 
enforced  collectivism,  or  doctrin- 
aire socialism,  75;  a  proposition  it 
holds  with  individualists,  76. 

Pennsylvania,  tax  system  of  con- 
ceded by  Lawson  Purdy  to  be  best 
of  the  American  systems,  230; 
wide-open  constitution  of  in  mat- 
ters of  taxation  construed,  293- 
295;  tax-system  of  in  practice, 
•307-315- 

People  in  their  collective  capacity  a 
sovereign  body,  79;  in  their  sov- 
ereign capacity  incapable  of  legal 
limitation,  80;  right  to  abolish,  al- 
ter or  amend  constitutions  always 
retained  by,  80;  collective  consci- 
ence the  only  limitation  of,  80-81; 
grave  problems  of  government  and 
the  like  are  not  beyond  their  cap- 
acity, 402. 

Perjury,  drastic  tax  bill  as  premium 
on,  212;  plain  lying  about  taxable 
property  as  steps  to,  222;  colored 
widow  in  Chicago  prosecuted  for 
in  re  tax  schedule,  236.  (See 
"oath.") 

Personal  mention  of  Minnesota  leg- 
islators, in.  query,  188-194;  (Senat- 
.  or  Wilson);  in  controversy, 
223-244  (Jacobson  with  Ste- 
phens); as  questioning  Law- 
son  Purdy,  228-230  (Dowling, 
J.  A.  Peterson,  Riley,  Washburn, 
Wilson) ;  as  writer,  232  (Senator 
Roverud);  as  politician,  238  (Sen- 
ator Baldwin)  ;  as  making  motions, 
offering  amendments  and  debat- 
ing, 238  (J.  A.  Peterson),  234-235 
(Hickey,  Jacobson,  Laybourn, 
Roberts,  Sageng),  238-244  (Hurd, 
Jacobson,  Larson,  Oppegaard, 
Pennington,  J.  A.  Peterson, 
Plowman,  Roberts,  Sageng,  Sch- 
urman,  Stark,  Von  Wald,  Wal- 
lace), 253-255  (Senators  Brower, 
Schel'bach,  Snyder),  258-261 
(Armstrong,  Jacobson,  Johnson, 
Laybourn,  Roberts),  262-263  (Sen- 
ators Baldwin,  Dougherty,  Ives, 
Knatvold,  McCarthy,  McGovern, 
McKusick,  Schaller,  Sheehan, 
Somerville,  Wilson),  276-281  (Sen- 


422 


HAVE     YOU     READ     APPENDIX     B? 


ators  Brower,  Fitzpatrick,  Hor- 
ton,  Ives,  Johnson,  Jones,  Mc- 
Carthy, Ryder,  Sheehan,  Sny- 
der,  Thompson,  Underleak, 
Young);  as  jurist,  254  (W.  B. 
Anderson) ;  as  voting  on  meas- 
ures, 216  (personal  property,  ex- 
emption), 240  (Jacobson  and  Wal- 
lace amendments  to  tax  code),  242 
(Plowman's  amendment,  Pennirig- 
ton's  amendment)  243-245  (killing 
tax  code),  261  (passing  Jacobson 
bill),  280  (killing  same  in  senate), 
283-284  (Senator  H.  J.  Miller's 
proposed  amendment  to  constitu- 
tion, Nichols'  same  in  house),  321 
(Alley  amendments,  Roberts  do. to 
constitution),  322  (constitutional 
amendments  in  senate),  324  (pass- 
ing said  amendments);  as  voting 
and  reporting  in  committees,  275, 

323- 

Personal  property,  tax  on  as  gener- 
al property  tax  must  be  at  same 
rate  as  on  realty,  184;  "credits" 
assessed  higher  than  the  things 
which  make  them,  184-185;  one 
reason  for  evading  tax  on,  185;  tax 
commission  thinks  that  in  few,  if 
any,  states  more  than  25  per  cent. 
is  listed  for  taxation,  186;  various 
branches  of  tax  on  condemned, 
186-187;  drastic  provisions  as  to 
taxing  virtually  admit  failure  of 
the  whole  plan,  188-207;  dictionary 
of  taxable  criticised,  188-191;  dras- 
tic provisions  for  listing  and  tax- 
ing proposed  by  tax  commission 
and  analyzed  by  author,  194-207; 
pursuing  the  sick,  absent  or  fratid- 
ulent  lister  of,  197-203;  fining  and 
removing  the  assessor,  197-198; 
tangible  may  be  taxed  on  same 
basis  as  realty  without  serious  in- 
justice, 228;  taxation  of  enforced 
by  torture  in  old  Rome,  230 
(note) ;  facts  and  figures  showing 
breakdown  of  general  tax  on,  367- 
373;  how  laws  for  taxing  are  di- 
vided against  themselves,  368- 
369;  percentage  of  in  New  York, 
North  Dakota,  South  Dakota, 
Kansas,  Indiana,  Washington, 
Wisconsin,  and  Tennessee,  369-372. 
(See  "assessment,"  also  "coun- 
ties.") 


Perry,  Prof.  Arthur  L.,  cited  by 
Wells  as  "most  economists,"  46; 
on  taxes  is  naively  touching,  46- 
47;  his  standpoint  out  of  date,  47; 
converted  by  MacLeod,  331. 

Petitions,  of  farmers  and  others 
touching  proposed  tax  code,  223; 
weak  evidence  of  what  they  pro- 
fess, 223;  dispute  concerning  good 
faith  in  signing,  223-224. 

Philippines,  will  be  held  though  it 
costs  life  of  every  native,  32-34; 
resolution  in  re  before  the  senate 
of  Minnesota,  33-34  (note) ;  issue 
of  counts  for  little  in  practical  poli- 
tics, 34-35. 

Pioneer  and  prairie  finance,  as  run 
on  orders  or  warrants^  121-123. 

Plutocracy,  not  without  likeness  to 
Neronocracy,  153-155;  particular 
crimes  of  153-155;  its  war  on  To- 
ledo, 153-155- 

Plutocrat,  the  American,  accepts 
his  environment,  149;  amiable 
enough  at  the  outset,  150;  ludicr- 
ous side  of,  150-152;  the  politi- 
cian despises  while  he  fries  him, 
150;  university  president  warns 
young  men  against  his  spirit,  151; 
stands  high  with  Prof.  Sumner  of 
Yale,  151;  "generally  comes  out  on 
top,"  152;  may  rebuke  the  ambi- 
tion to  be  rich,  152;  a  time  in  his 
career  when  for  $25,000  or  so  he 
would  have  bound  himself  to  be 
good,  152;  stealing  part  of  his  for- 
tune his  chief  individual  crime,  152; 
not  individually  responsible  for  his 
more  atrocious  crime,  152-153;  his 
class  judged  by  the  worst  speci- 
mens of  him,  153;  shrinks  from 
no  crime  on  sufficient  occasion, 
I53-J56;  buys  a  Democratic  legis- 
lature, 155;  may,  like  Nero,  be  a 
lavish  giver,  156;  may  be  bitten  by 
the  professor  he  feeds,  156;  recon- 
ciles patriotism  with  piracy,  156- 
157;  robs  because  the  right  op- 
portunity is  present,  157;  must 
have  ideals  of  some  sort.  158; 
may  be  knocked  out  by  the  taxing 
power,  159;  has  right  of  way  until 
rightly  barred,  159-161;  new  juris- 
prudence can  reach  him,  160-161; 
the  tenure  of  his  vested  rights," 
161. 


INDEX. 


423 


Police  power,  elastic  cover  for  cer- 
tain taxes,  59;  license  taxes  impos- 
ed under,  69-70;  sarcastic  and 
grave  legal  views  of,  83. 

Political  Economy,  caution  as  to  ac- 
cepting formulas  of,  (preface)  yii; 
theories  gone  bankrupt  littering 
path  of  15-16;  theory  alone  not 
sufficient  for  greatest  genius  in, 
16;  D.  A.  Wells  on  general  bank- 
ruptcy of  in  re  taxation,  38;  prev- 
alent mistake  of  writers  in,  48; 
and  the  single  tax,  330- 
366  (all  of  ch.  xviii) ;  when  the 
classical  was  served  with  notice  to 
quit,  330;  boom  of  from  Ricardo 
to  Mill,  330-331;  protesting  voices, 
331-332;  its  salaried  basis  and  self- 
conceit,  331-332;  its  metaphysics, 
332-335;  German  socialists  and 
Henry  George  press  it  into  their 
service  to  the  great  disgust  of  the 
professors,  335,  337;  jarred  by 
British  Association,  Cliffe  Leslie 
and  Encyclopedia  Britannica,  335, 
337;  Ricardo,  Jonathan  Edwards, 
Shakespeare  commentators  and 
the  Philistines,  336-337;  Henry 
George  and  E.  L.  Godkin  on  the 
new  economy,  337-33&;  "Progress 
and  Poverty,"  based  on  Ricardo, 
is  born  and  boomed,  33^-339; 
George's  theory  all  wrong  unless 
Ricardo's  doctrine  of  rent  is  true, 
340;  alleged  demonstration  of  said 
doctrine,  340-341,  (note);  a  pro- 
fessor of  the  new  reviews  George, 
358-365;  economists  cited  and  ap- 
proved in  reference  to  income  as 
normal  source  of  taxation,  384- 
385;  economists  on  the  incidence 
of  taxation,  386-397. 

Population,  comparative,  of  various 
states,  100-104;  Donisthorpe's  re- 
flections on  a  dense,  105-106;  nine 
states  having  an  aggregate  area 
but  little  larger  than  Minnesota's 
have  a  population  of  9,000,000,104. 

Populists,  as  recruiting  ground,  37; 
lively  enough,  and  why  hopeful, 
167; "did  not  quite  vote  as  a  unit 
in  Minnesota  tax  matters,  233. 
(See  personal  mention.) 

Price  of,  and  where  to  procure  this 
book.  (See  last  page  of  Appendix 
B.) 


Professorial  decadence,  a  professor 
laments,  92. 

Propositions,  general,  based  on  the 
valuation  and  taxing  of  Teal  es- 
tate, 181-182. 

Protection,  utterance  on  in  debates 
of  first  congress,  19-20;  British  to- 
bacco tax  as  covert  example  of, 
20-21;  Garfield  thought  the  fath- 
ers well  posted  on,  67;  in  connec- 
tion with  the  incidence  of  federal 
taxes,  399-401. 

Proudhon,  J.  B.,  on  taxation  as  the 
shield  of  monopoly,  44;  on  single 
tax  as  the  sum  total  of  fiscal  in- 
iquity, 349. 

Public  service  companies,  heard  in 
opposition  to  Jacobson  bill  by  sen- 
ate committee,  268-275;  the  small- 
er ones  feared  confiscation,  268; 
author  suggests  gross  earnings 
tax,  discreetly  graded,  as  best 
way  to  tax  them,  269;  comptrol- 
ler of  Twin  City  company  on  taxa- 
tion of  as  compared  with  railroad 
taxation,  and  generally,  270-274; 
earnings  of  certain  ones,  270-274; 
other  companies  protest,  274-275; 
unit  rule  for  taxing,  301-303,  380- 
383;  proposed  constitutional 
amendment  as  affecting  in  Min- 
nesota, 324-328. 

Purdy,  Lawson,  a  single-taxer,  ad- 
dresses large  audience,  226-230; 
keeps  single-tax  in  background, 
226-228;  questioned  by  Minnesota 
legislators,  228-230. 

Railroads,  how  they  oppose  paying 
any  more  taxes  in  Wisconsin,  87- 
89;  taxation  of  in  Minnesota,  107- 
113;  ideals  of  Minnesota  and  Wis- 
consin compared  as  to  taxing, 
113;  earnings  and  profits  of  in  the 
Hill,  or  Great  Northern  system, 
127-136;  their  taxes  compared  with 
those  of  street  railways,  270-272. 

Real  estate,  assessed  values  of.  com- 
pared with  selling  prices  of  in  va- 
rious states,  171-181;  assessed 
higher  compared  with  actual  value 
in  the  city  of  Milwaukee  than 
e1sewhere  in  Wisconsin,  175; 
over-assessed  in  Minnesota  cities, 
and  in  some  rural  counties,  177- 
180:  only  occasionallv  Drofitable 
as  an  investment,  177-180;  in- 


424 


HAVE     YOU     READ     APPENDIX     B? 


stances  of  its  over-assessment  in 
St.  Paul,  178  (note);  five  propo- 
sitions based  on  the  valuation  and 
taxing  of,  181-182;  underassess- 
ment of  in  Red  River  Valley,  213; 
taxed  on  basis  of  18  per  cent,  of 
true  value  in  Iowa,  308;  differen- 
tial in  favor  of  between  its  as- 
sessed value  and  that  of  moneys 
and  credits,  368-369. 

Reform,  taxation  for,  comes  late  in 
civilization,  21;  Hamilton  favored 
excise  tax  partly  for,  21 ;  most 
governments  too  hard  pressed  for 
money  to  experiment  with  taxa- 
tion for,  21-22;  United  States  gov- 
ernment an  exception,  22;  in- 
stances of  taxation  for  by  United 
States,  22-23;  rationale  of  suc- 
cessful taxation  for,  22,  25;  D.  A. 
Wells  opposed  to,  25,  68;  Justice 
Story  gives  wide  sweep  to  taxa- 
tion for,  70-71  (note.) 

Republican  party,  as  party  of  ac- 
complishment, 32;  is  now  short  of 
issues,  35-36;  has  substitute  for  is- 
sues in  Roosevelt,  35;  dilemma  of 
magnates  between  their  own  and 
the  voters'  choice,  36;  taking  up 
tariff-reform  evidence  of  issue  ta- 
ble swept  clean,  36;  good  recruit- 
ing ground  for  man  with  right  is- 
sues, 37;  in  relation  to  tax  reform 
in  Wisconsin,  87-89. 

Revenues,  public,  are  by  gift,  by 
contract,  by  compulsion  (preface) 
viii;  other  than  from  taxes  little 
heeded  in  U.  S.;  90. 

Road  maritime,  gross  blunders  of 
the  Century  and  other  dictionaries 
in  defining,  54-55,  and  Appendix 
A. 

Robbery,  tribute  akin  to,  13;  taxa- 
tion for,  meaning  of  as  applied  to 
taxation,  16-19. 

Roman  emperors,  various  ones  men- 
tioned for  comparing  ancient  and 
modern  influence  of  power  on 
character,  139-141,  146-149,  155- 
156;  Augustus  as  debauchee,  146; 
the  wicked  and  Napoleon,  141-148; 
no  term  in  English  to  express 
their  absolute  dominion,  147;  mod- 
ern despots  tame  and  petty  com- 
pared with,  148;  vice  never  more 
extravagant  or  uncontrolled  than 


under,  149;  in  re  taxation,  149; 
in  what  respects  modern  pluto- 
crats do  not  imitate,  155-156;  Car- 
acalla  a  lavish  giver,  156;  grind- 
ing taxation  under  later  emperors, 
230  (note). 

Roosevelt,  Theodore,  as  personal 
substitute  for  other  issues,  35;  pity 
•  on  the  whole,  if  not  allowed  to 
demonstrate  that  the  office  lim- 
its the  knight,  37. 

Ruble,  sloppy  valuation  of  in  Cen- 
tury Dictionary,  54-55  (note);  see 
also  Appendix  A. 

Russian  despotism,  relation  between 
and  Russian  revolutionists,  19. 

Say,  J.  B.,  quoted  on  the  euphemis- 
tic names  of  tax,  15  (note);  on 
rationale  of  plucking  the  peasant 
in  France,  18. 

School  houses,  built  for  fraudulent 
gain,  122-123. 

School  taxes,  some  individualists 
look  on  as  robbery,  20;  unjust 
from  individualist  point  of  view, 
64-65;  sometimes  founded  in 
fraud,  122-123. 

"Scrap,"  as  taxable  personalty,  189- 
190. 

Seligman,  Prof.  E.  R.  A.  on  pri- 
mary classification  of  public  rev- 
enues (preface),  viii-ix;  his  brief 
mention  of  eminent  domain  and 
penal  power  (preface),  ix-x;  lists 
taxing  power  under  the  "forms  ot 
fees,  special  assessments,  and  tax- 
es" (preface),  x;  jars  Prof.  Perry 
and  others,  47;  on  fictional  distinc- 
tion between  police  power  and 
taxing  power,  59  (note) ;  on  fees 
and  assessments  cited  and  criti- 
cised, 93-94;  his  enumeration  of 
thirteen  different  bases  for  taxing 
corporations  in  the  United  States, 
98;  review  of  his  review  of  the 
single  tax,  348-349,  358-365;  his 
"Shifting  and  Incidence  of  Taxa- 
tion," 386'  sundry  quotations 
from,  387-391. 

Ships,  folly  of  applying  property  tax 
to,  189/216-219;  taxable  only  at 
home  port,  218;  Governor  Van 
Sant  on  taxing,  217-218;  capital 
tax  on  easily  evaded,,  218-219; 
Minnesota  legislature  wise  on  this 
point,  234. 


INDEX. 


425 


Silver,  would  not  have  been  remon- 
etized  though  Bryan  had  been  suc- 
cessful, 31  (note);  real  issue  of 
1896  not  dead  with,  32. 

Single  tax,  in  connection  with  L. 
Purdy's  address,  226-231;  chapter 
XVIII  of  this  book  devoted  to 
evolution  and  criticism  of,  330- 
366;  relation  of  to  classical  polit- 
ical economy  (see  that  title) ;  pub- 
lication and  boom  of  "Progress 
and  Poverty,"  338-339;  meant  to 
be  a  reform  tax,  342;  its  land  and 
the  land  of  the  law,  342-343;  diffi- 
culty in  executing  single  tax  law, 
343-344;  human  nature  insuperable 
barrier  to  its  adoption,  344,  352, 
358:  not  adopted  in  the  South  Sea 
colonies,  344-348;  the  single  tax 
of  the  Physiocrats,  348;  Voltaire 
and  Proudhon  on  the,  348-349: 
Grimshaw,  of  Minneapolis,  rakes 
the,  fore  and  aft,  351-358;  review 
of  Seligman's  review  of  the,  358- 
365;  true  significance  of,  and  praise 
for  George,  366. 

Single-taxer,  a,  before  the  Minne- 
sota legislature,  226;  limitations  of, 
226-228;  most  effective  argument 
lies  in  pointing  out  the  flaws  in 
the  general  property  tax,  226-227; 
Trios.  G.  Shearman  as  one  having 
acumen  and  stating  practical  diffi- 
culty in  making  single-tax  effect- 
ive, 227;  loves  simplicity  of  classi- 
fication, 228. 

Slavery,  chattel,  issue  of,  simple  and 
semibarbarous,  30;  industrial,  pre- 
sents great  issue,  30. 

Special  assessments,  branch  of  tax- 
ing power  (preface),  x;  intermedi- 
ate between  fees  and  taxes,  93; 
generally  compulsory  and  often 
confiscatory,  93;  Seligman  on  cri- 
ticised, 93-94. 

States,  in  the  American  Union,  gov- 
ernments of  may  tax  home  indus- 
tries to  death,  but  can't  reach  ef- 
fectively the  means  or  the  goods 
of  interstate  commerce,  22;  com- 
parative population  of  various 
100-103;  anarchy  of  tax  reform 
movements  and  tax  laws  in,  164. 

Statesmanship,  best  luck  for  the 
bankrupt  sort  is  to  meet  corres- 
ponding opposition,  27;  that  of  Na- 


poleon, III,  typically  bankrupt, 
27-29;  is  doing  nothing  against 
the  next  panic,  32. 

Steel  trust,  the,  as  apprehended  by 
legislature,  259-260;  alleged  to 
hold  Duluth  as  a  rotten  pocket 
borough,  259;  allegation  denied, 
.259-260. 

Stein,-  Lorenz  von,  Austrian  profes- 
sor, quoted  in  new  translation, 
391. 

Steuart,  Sir  James,  an  economist  be- 
fore Adam  Smith,  pithy  saying  of 
quoted,  16. 

Story,  Justice,  on  taxation  for  ends 
other  than  revenue,  70-71  (note). 

Street  Railways,  taxation  of  in 
Minnesota,  113-114;  arguments 
concerning  before  Minnesota  sen- 
ate committee,  268,  270-274;  earn- 
ings and  comparative  taxation  of, 
270-274;  unit  rule  and  the,  in  Chi- 
cago, 301-303,  380-383. 

Supervisor  of  assessment,  county, 
reconimended  by  tax  commission, 
202;  duties  of,  202-5;  pleasures  and 
opportunities  of,  202-5;  compelled 
by  law  to  impeach  the  law,  204, 
compensation  of,  204-205. 

Switzerland,  large  work  on  taxes 
of,  403;  personal  property  and  in- 
come taxes  in,  403. 

Tail-twisting  as  means  of  reputa- 
tion, 27;  as  bad  statecraft,  385. 

Tax,  successive  names  of  as  showing 

.  historical  development,  15  (note); 
definitions  of,  (see  definition) ;  na- 
ture of  (see  taxation) ;  is  a  "ca- 
lamity," 44;  Paul  Leroy-Beau- 
lien's  definition  of  excellent  in 
precise  but  narrow  formality,  45; 
contribution  as  euphemism  for, 
45;  Cooley's  definition  of  quoted 
and  criticised,  49-53;  proportional, 
or  equal  and  uniform,  as  applied 
to  neither  useful  nor  true,  50-52; 
poll-taxes  "grievous,"  50-52;  broad 
powers  included  in  the  power  to 
levy,  as  per  Justice  Story,  70-71 
(note) ;  must  be  for  a  public 
purpose, — a  proposition  well  tak- 
en, in  so  far  as  not  identical,  72; 
Cooley's  distinction  between  the 
object  which  authorizes  and  that 
which  does  not,  72-74;  yield  of 
fine  and  license  taxes  in  Minneap- 


426 


HAVE     YOU     READ     APPENDIX     B? 


olis,  354;  special  taxes  in  Minne- 
apolis borne  exclusively  by  land, 
356;  true  reason  for  condemning 
insurance  theory,  purchase  theory, 
benefit  theory  or  any  exchange 
theory  of,  47;  power  to,  when 
none  to  license,  59  (note);  what 
taxes  are  in  substance  as  distin- 
guished from  form,  85;  contrast 
between  United  States  and  Eu- 
rope in  re,  98;  total  in  Minnesota 
for  various  years,  115;  yield  of 
gross  earnings  in  1891  and  1901, 
113;  on  inheritances,  251  (see  in- 
heritance tax). 

Taxation,  formula  of  as  regards  re- 
sult and  purpose,  13;  robbery  in 
name  of,  16-19;  form  of  in  rude 
and  remote  beginnings  indistinct 
and  of  little  practical  avail,  14; 
real  beginning  for  us  is  "in  the 
middle,"  14;  professorial  theories 
not  likely  to  change  current  of, 
14-15;  kinds  of  (for  robbery,  rev 
enue,  reform)  never  quite  distinct 
in  time,  coexistence,  or  purpose, 
16;  by  canal  ring  in  New  York, 
16-17;  by  Indian  monarchs  took 
nearly  all  but  means  of  bare  sub- 
sistence, 17;  for  revenue  pure  and 
simple  not  rare  in  America,  19; 
for  revenue  and  incidental  protec- 
tion by  first  congress  under  the 
constitution,  19;  British  sugar  duty 
as  tax  for  revenue,  20;  apparently 
for  revenue,  yet  covering  other 
motives,  illustrated  by  British  to- 
bacco tax,  20-21;  for  reform  re- 
quires considerable  development 
of  civilization,  21;  National  and 
state  conscience  is  the  only  limit 
to,  26;  under  regime  of  Napoleon 
III  kept  low  by  borrowing,  28 
(note) ;  puts  statesmanship  on  final 
proof,  29;  noisy  agitation  of  may 
cover  barrenness  of  ideas,  29-30; 
author's  views  on  make  lock-step 
with  his  views  on  government,  30; 
chaff  of  for  next  year's  seed,  37; 
embarrassing  subject  for  political 
economists,  38;  speaks  with  clear 
voice  from  platform  of  common 
sense  and  discreet  opportunity,  38; 
author's  formula,  taxation  for  rob- 
bery, etc.,  not  a  definition  of,  39; 
figurative  statement  of  what  strict 


individualists  would  allow  to  be, 
39;  definition  of,  and  of  taxes,  be- 
set with  practical  and  metaphysical 
pitfalls,  39-40;  "Taxation  no  tyran- 
ny" as  applied  by  Dr.  Johnson  to 
the  American  colonies,  40;  uni- 
formity as  working  basis  of 
practically  abandoned  by  Amer- 
ican jurisprudence  and  states 
manship,  59;  entire  wealth  of 
the  country  in  easy  legal 
reach  of,  61 ;  author  takes 
as  he  finds,  62;  individualist  ap- 
prehension as  to  tremendous  pow- 
ers of,  77;  viewed  from  its  formal 
side  has  no  limit,  86;  limited  on  its 
substantial  side  only  by  quantity 
of  takable  wealth,  86;  in  United 
States  dwarfs  other  sources  of 
public  revenue,  90;  of  railroads  by 
gross  earnings  in  Minnesota,  108- 
109,  113;  by  same  in  Wisconsin, 
113;  of  street  railways,  113-114; 
of  personal  property,  183-208;  ex- 
emption of  personal  property 
from,  213-216;  before  the  Minne- 
sota House,  231-245;  before  the 
Senate,  246-256,  261-263,  275-281; 
judge-made  conflict  between  Min- 
nesota and  Ohio  constitutions  on, 
285-290;  and  the  federal  constitu- 
tion, 291-301;  under  wide-open 
constitutions,  306-317;  under  pro- 
posed constitutional  amendment, 
324-328. 

Tax  Commission,  of  Minnesota,  au- 
thorized, 162;  scope  of,  162-163, 
membership  of,  163;  regrets  lack 
of  time  and  means  to  accumulate 
tax  data,  169;  finds  startling  dis- 
regard of  law,  176;  its  conclusions 
as  to  real  estate  valuations  not 
quite  justified,  177;  proposed  code 
of,  a  warning  example;  accepts 
but  laments  its  slavery  to  the  con- 
stitution, 185,  187;  calls  evasion  of, 
personal  property  tax  universal, 
186;  does  not  favor  taxing  mort- 
gages, 186;  nor  credits,  187;  de- 
spairs of  marked  reform  under 
present  constitution,  and  favors 
income  tax,  187;  weighted  with 
self-contradiction,  188;  has  luke- 
warm faith  in  its  proposed  code,  . 
188;  drastic  provisions  interesting 
and  why,  188;  its  dictionary  of 


INDEX. 


427 


taxable  personal  property  criti- 
cised, 188-190;  particular  provi- 
sions by  for  taxing  personal  prop- 
erty, 191-205;  its  own  duties  and 
compensation  as  therein  pre- 
scribed, 205-207;  code  of  and  the 
hunchback  story,  207;  two  mem- 
bers of  defend  their  work,  214, 
221-222;  quoted  and  praised,  247- 
2535  proposed  constitutional 
amendments  offered  by,  303-305. 

Taxing  power,  wide  range  of  pur- 
pose in,  as  per  Justice  Story,  70- 
71  (note) ;  real  limitation  of  lies 
in  opposition  of  adverse  interests, 
62,  86,  88;  power  of  adverse  inter- 
ests illustrated  in  Wisconsin,  62, 
86,  88;  virtually  admits  inefficiency 
by  resorting  to  drastic  measures, 
186-188,  198,  199-202,  204;  defect- 
ive in  collecting  real  estate  taxes 
under  former  Minnesota  laws, 
246-247;  the  "Anderson  bill,"  as 
an  aid  to,  247-249;  how  weakened 
by  "refundments,"  248-249. 

Tilden,  Samuel  J.,  quoted  in  re  ca- 
nal ring  robbers  and  inequality  of 
human  justice,  16-17. 

Tobacco,  British  tax  on  protective 
of  British  maufactures,  20-21; 
monopoly  in  sale  and  manufacture 
of  a  vast  state  industry  in  France, 
95-98;  and  yields  French  govern- 
ment an  enormous  revenue,  95- 
98. 

Tribute,  simplest  form  of  much  the 
same  as  robbery,  13;  when  makes 
a  first  step  toward  taxation,  13-14. 

United  States,  government  of,  in  po- 
sition to  make  financial  experi- 
ments, 22;  has  no  police  or  regu- 
latory power  over  kind  and  qual- 
ity of  manufactured  articles,  except 
indirectly  under  cover  of  revenue 
laws,  22;  its  successful  taxing  of 
state  bank  notes  out  of  circula- 
tion, 22;  its  attempt  to  drive  oleo- 
margarine from  the  markets,  23- 
26;  may  pass  a  so-called  "pure- 
food"  law  in  guise  of  a  revenue 
measure,  25;  revenue  and  per  cap- 
ita taxation  in  1860,  98.  (See  Con- 
stitution.) 


Value,  meaning  and  synonyms  of,  in 
tax  phraseology,  191. 

Valuation,  of  real  and  personal 
property  in  Minnesota,  114-116;  in 
certain  counties  thereof,  116-125; 
ratio  of  assessed  to  true,  as  re- 
gards realty,  in  Iowa,  Wisconsin, 
Minnesota,  Pennsylvania,  and  In- 
diana, 171-181;  must  be  annual  for 
taxing  personal  property,  191;  of 
realty  has  two-year  intervals  or 
longer,  191. 

Van  Sant,  S.  R.,  Governor  of  Min- 
nesota, calls  special  session,  163; 
his  discreet  and  sufficient  reasons 
for  so  doing,  163-164;  judicious 
words  of  on  shipping  interests, 
217-218. 

Vessels.     (See  ships.) 

Voltaire,    ridicules    single    tax,    348- 

349- 

Wagner,  Adolph,  cited  on  the  prac- 
tical difficulties  to  be  overcome  in 
comparing  tax  systems,  14  (note). 

Waterson,  Henry,  in  re  tariff  reform 
and  Cleveland,  36. 

Wells,  David  A.,  against  oleo-mar- 
garine  tax,  25;  on  bankruptcy  of 
political  economy  in  re  taxation, 
38;  on  proportional  taxes  as 
meaning  equal  and  uniform,  57» 
goes  to  absurd  lengths  as  doctrin- 
aire and  individualist,  57-58;  his 
individualism  contrasted  with  the 
real  thing,  64-66;  on  power  of  tax- 
ation as  limited  generally  and  to 
public  purposes,  66-67,  68-72; 
where  Cooley  fails  him,  69-71; 
quoted  in  re  taxation  in  Rome, 
230  (note);  on  the  hidden  bonds, 
etc.,  in  Connecticut,  375;  on  fed- 
eral income  tax,  376-377;  on  Brit- 
ish do.,  379-380;  his  "weariness 
and  disgust"  over  Seligman's  book 
on  "The  Shifting  and  Incidence  of 
Taxation,"  386-387;  on  the  whis- 
key and  tobacco  tax  paid  by  the 
American  Bible  Society,  390. 

Wisconsin,  movement  for  higher 
taxation  of  corporations  in,  86-88; 
current  history  in  shows  the  deep 
collateral  problems  into  which  tax 
questions  revolve,  89. 


14  DAY  USE 


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